So everything about your small business idea is superb, i.e. it’s one of the best small business ideas that have potential to become tomorrow’s next big thing, people are excited about such kind of product/service and you also have a good competitive advantage over the rivals, but it’s poor credit history which is not letting you proceed further? Of course, your credit history matters when it comes to applying for any type of business financing and without sufficient finances, you may not be able to grow your startup faster.
even if you are asking friends and family for financing your startup, they might not want to lend you money knowing that you do not have a good credit history!
Well, you have the option either to give up your business idea right there or be strategic and think of some solution. Remember that your bad credit history is not a lifetime stamp on your credit score and there’s always a way where there is will. So, this article will guide you with the later option.
Let’s start with trying to improve your credit score first:
- 1- First of all you must seek good credit counseling to help you get back on track. They will help you develop a realistic plan for eliminating debts and ultimately improve your credit score.
- Since it will take some time for the credit improvement plan to work, you must not waste the time waiting for an improved credit score. Rather, think of doing some job that generates money for that specific time. It can either be a part-time job, a small freelance project or a service that you can offer parallel while being on your full-time job.
- Doing job is certainly not the lifetime option, but saving a little amount of money from your salary will bring you closer to your goal. Ideally, you should save a specific amount first, and then budget for stuff like eating out, having new clothes, and entertainment.
- Developing a personal budget will help not only to set an achievable goal but will set a timeline as well. There are a lot of free budget apps that you can have on your smartphone and track each transaction on daily basis to stay on track.
- Eliminating unnecessary expenses will help you improve your savings and get closer to the goal. Till the time your credit score improves you may cancel magazine subscriptions, limit dining out etc. In case if you find something very attractive to buy, think 3 times if it is really important to buy it right now and most of the time, the third time you will drop it!
Now, when you know what will improve your credit score and what may make it worst, you can get yourself out of debt in some time. But you must not wait for credit score to improve because funding your small business with a credit card is not the only option. Think of all other possibilities. For instance:
- Look for small business grants offered by government and various startup accelerators. Almost every country has multiple startup funds for innovative ideas as well as for specific industries. There are hundreds of such grants offered in the USA alone including grants for disabled entrepreneurs.
- Explore crowdfunding platforms and strategically plan a crowdfunding campaign. Here is a big list of crowdfunding websites to pitch your idea, but you may also look for niche specific crowdfunding, i.e. OFF3R, PRIKK, Ratafire, etc.
- Look for a co-founder who can bring in funding for your startup. Connect with people at Cofounders Lab to find one.
- Network with targeted people who can help you bring your idea into existence either with funds or else with their expert advice, and if they cannot help with any of these, they can at least connect you with people who can do so. Look to build business connections using Linkedin, find possible investors through Merar.com, connect with local elite via Meetup.com and EFactor.com.
The Bottom Line:
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Once your financial position improves, and you have explored the list of other funding sources for business, you are not only able to apply for any type of business loan/funding but at that specific time, you will actually know how and when to launch your business.