When it comes to financing, your credit score is of utmost importance as that is the three-digit score which speaks about your financial creditworthiness. A high score will mean financial diligence in the past and a poor credit score will mean just the opposite. If you have a good credit score, chances are high that you will receive favorable rates and terms on your business funding options but when it comes to lower credit score, you will be subject to higher rates and unfavorable terms and conditions. Nevertheless, that doesn’t imply that people with lower credit scores won’t get access to business funding. There are options for everybody. Here are some useful ideas for entrepreneurs who have low scores and who have been faced with financial challenges.
- Look beyond bank loans and credit cards for financing: Studies reveal that bank financing and credit card withdrawals account for only 25% of the total funding that is actually required for the initial-stage entrepreneurs. This implies that 75% of the money which you need for financing your business comes from different other sources which rely much less on your credit score. There are credit cards and various other lending programs which have been designed for people with poor credit score. A bank option for people with poor scores is a home equity line of credit.
- Look for loans from friends and relatives: Everyone is in love with the idea of entrepreneurship but every entrepreneur will go through a situation where more than 50% of the business owners get financial help from relatives and friends. Chances of getting loans from your relatives and friends are high as they always want your good and they always want to turn your business dream into reality. They may not check your credit score as they trust on you as a person or they believe in you. Now you can even use private loans from friends and relatives to rebuild your credit score.
- Watch out for online lenders and microlenders: Did you know that with the advancement of the internet, there are many non-bank lenders who now offer microloans to entrepreneurs? Such loans typically range from $5,000 to $25,000. Some of these online websites are super sources of best online personal loans and commercial loans for those with poor credit score. They even report your payments to the credit bureaus which is a transparent process of increasing your credit score when you make timely payments. You should also ensure shopping around and comparing rates so that you can choose the best rate in the market.
Therefore, if you’re into the market to choose a business loan despite having a bad credit score, you need not fret as you’re not alone. You can take into account the above mentioned options and use the proceeds in starting off with your business or expanding your business infrastructure.