A great business idea can strike you at any time in your life. Whether that’s an ingenious invention or service, or a gap in the market you’ve spotted to invest in. For some people, however, the problem arises in their financial history. Decisions made years ago can still bite when it comes to a bad credit record. Even good faith credit decisions can backfire. The outcome of this is hesitant lenders, unwilling to loan cash to what they consider a liability wrought prospect, even if your ways has clearly changed. Funding your business can be a bad credit or considered difficult.
So, what to do?
There is, fortunately, a wide range of methods to improve your credit score and gain financial backing. An online service can raise cash from advertisements. Or, failing that, raise your funds in a number of different ways. This is especially easy in the digital age, where intrepid developers have created countless platforms with which to raise capital.
Understanding Your Credit Score
Before you start looking into correcting your credit score or applying for any sort of finance, it’s important to fully understand what your credit score is. The credit score acts as a ledger for all of your lending behavior, constructing an image for lenders and computer algorithms to assess your suitability for a loan or credit card. These credit ‘events’ aren’t forever, but according to Equifax credit notes stay for seven years. For bankruptcies, this can raise to 10 years. You can be feeling the effect of poor decisions for years afterward.
The effect of credit scores is profound as many lenders now use computer algorithms to make a decision before reaching a human stage. Whereas some banks will allow interviews with experienced salesmen to give you a chance to explain your idea and demonstrate that you’re a suitable borrower, many will revert to the computer-generated decision.
When it comes to correcting the record, it’s often a case of trawling through your history. You can use many services to see the exact details of the events in your credit history and contact the individual lenders to correct any errors. When it comes to credit collection agencies, you can have judgments placed on your record that can impact on your ability to get a loan, to rent a property, and more. These judgments can sometimes be the default action taken by collection agencies. Thankfully, these can be removed to, improving your credit score and this useful reference provides some detailed information on how to action removal.
Poor Credit Lenders
If your credit score is accurate and up-to-date, you may be left without the option of using lenders that you would first turn your hand to. However, there is a multitude of lenders now that have made use of liberalized lending regulations to offer lines of credit to those without the best credit scores.
The problem with some of these loans is high APR rates, designed to encourage the borrower to practice good lending habits. The high level of interest reflects a lack of trust in the credit score. However, there’s a hint that times are changing. NBC reported that companies are offering low interest to upstart companies, recognizing the often patchy or quiet credit history of the students typically building these new businesses.
Less popular than conventional bad credit loans, but useful for those who have families with significant assets or who are happy to back you up with a business idea. Guarantor loans rely on a named family member or friend to be bound by contract to pick up the slack if you are unable to complete the terms of your credit line. These can be useful if you are unable to raise credit first-hand due to your credit score but have otherwise good financials and references.
Crowdfunding has been used for years now for individual costs and causes, such as medical bills for children from disadvantaged backgrounds. Companies like GoFundMe have monopolized the market, offering a very simple and accessible charity interface. In the past few years, however, these sorts of services have branched out to add functionality for startups and small business companies. Services like Crowdfunder and Patreon allow business owners to raise capital in exchange for incentives so those early investors.
Building from this, there are crowdfunding companies that help new businesses and startups to create an investment base by issuing shares at a base rate for the limited period. These are effective ways to help your business raise capital and grow when you’re unable to access credit. Bear in mind that a solid base is needed, as many crowdfunding platforms are tightening up.
There are a few choice areas in which the government are, or have, focused considerable time and energy. These include green tech, where many states are issuing green bonds to investors and taxpayers to raise capital to then invest in high tech environmental friendly schemes. You could take advantage here if your business ideas fits that particular niche.
In many cities, especially San Francisco and now including New York, there is a huge focus on tech startup companies in this regard. You can find subsidies for your business alongside a wider focus on making sure that your accommodation and business premises have access to the best amenities available to bring prosperity to the area. This has taken a supercharged form in China, where ‘venture communism’ in Hangzhou has exploded, and this model is seeing expansion around the world, albeit at a lower and more regulated level.
So, when you don’t have the best credit score, not all is lost. Many times, you can make alterations to your credit record and take steps to rectify the disadvantageous marks that can hold you back. In other situations, you can use credit lines from lenders willing to work with those with lower scores. Finally, you can raise your money yourself, by pitching to the public. There are plenty of ways to raise capital out there, and with this knowledge, anyone can find the kickstart their business needs.