Well, no one can take it from you. If you decide to pursue a business and work it, then you’re one brave soul that needs all the help you can get. Over the past years, the number of people wanting to do business has been steadily on the rise. The problem is how do you start a business if you don’t have a good credit standing?
And the numbers simply add up. Over 27 million Americans have started or are about to start their business. That’s a huge percent. Many are starting small starting their business from the comforts of their home. Also, there’s a large percentage that is also not starting yet but making preparations. They’re registering their business and finding a space for the business. Needless to say, all this is no cinch especially for people who have bad credit scores.
According to FISCO scores, about 16% of the population carry a bad credit score ranging from 300 to 579. That certainly puts you in the pink. Who would want to do business with someone out of luck? Thankfully, there are many funding options that you can check out. Given that you do things by the book.
A Traditional Mortgage Lender
First on our list are traditional mortgage lenders. Given the fact that many people are denied bank loans, this definitely a good option. The fact that you have a bad credit score even disqualifies you for bank loans. But with this alternative, you still stand a chance.
One option to take a look at is the FHA financing plan. This is an insured financing plan by the Federal Housing Administration. The good thing is that with a credit score as low as 580 you may still get a good loan.
Take note that for different lenders it varies. Some lenders can accept a credit score as low as 500 while for some the lowest is 580. The score determines the interest rate and downpayment. For very low scores like 500, the downpayment can be as much as 10%. And the interest could be as much as 4.8%. As the score increases the percent for downpayment and interest reduces. But even at this take note that different lenders work with different terms.
Family and Friends
Even if banks and mortgage lenders leave you, family and friends won’t. That’s why they are your greatest support system. It’s the last resort if all else fails which usually happens when your credit score is very low. Obviously, you won’t have to do a lot of paper works or go through lengthy processes just to get your intended money.
You have to do your best to pitch the business idea to them. And that includes telling them how you can make it all work. At the same time assure them of a time frame to return the money they borrow you. As they want you to succeed, they’re highly likely ready to help.
The catch? This is assuming you’re on good terms with your friends and family. If not, you’re facing an uphill climb convincing them.
There are also microlenders that can help out. They are nonbank lenders that can be found online. Their main job is helping out entrepreneurs. With a price range of $5000-$2500, the money microlenders can lend can get you off to a good start.
The problem is if your budget falls outside of their range. You may have to find another alternative to add things up.
With this though you have to be very careful. Make sure you do thorough research. Ensure that you do enough comparisons between the different offers. Some offers can be quite tricky. Not taking a proper look at them can cost your business a whole lot in the long run.
The diver’s code should help you here: Look twice before you leap. If you need more information about it, you can find out more about how microlending works here.
Gifts and Grants
Don’t overlook gifts and grants. Who says you have to be fully responsible for the financing of your business? There are gifts and grants that can help sponsor your business idea. However, this may need tons of due diligence. For one, you have to be very deliberate about government grants and gifts to suit your business.
Be careful about services that promise to get good grants for you. You could be duped. Do your homework well. Hard work pays. If you are persistent, a good one should find you in time. Indeed, patience here is a virtue.
Thus, a bad credit score should not stop you from pursuing your business dreams. Still, you should know that you need to keep your house in order. When you put ample discipline into it, your fruits of labor should be closer than you think. As they say, the more you work, the luckier you get.