If you have bad credit, it may feel as if your entrepreneurial dreams are out of reach. Not so! Actually, starting a business can be a great way of taking control of your life financially and emotionally. When you are a cog in someone else’s machine, there are limits on what you can do and how much you can earn but when you are your own boss the sky is the limit. This empowerment can help you address your finances as well as the psychological damage of debt that may have affected you in the past. Here are some options if you are planning to start a business with bad credit.
Do what you can to improve your credit
Whilst not a quick fix, there may be things you can do to improve your credit to the point where you can get a business loan. Get into good habits of paying all bills on time not just for your credit cards but for things like utility bills as well. You could also take bigger steps such as taking out one of the many decent personal loans available to pay off your credit card debts and improve your score, as with this Norwegian lender’s example. Not only will working on your credit improve your rating, it will also teach you important financial management skills that are useful for your business.
Borrow from friends and families
There is no shame in turning to those closest to you for help. According to the Bank of America, more than a third of small business owners have received financial support from family or friends at some point. Family and friends likely want you to succeed and, whilst banks will judge your credit score, they will judge whether you are likely to pay it back on your character and your business connections.
Can you reduce the costs of your business?
Of course the best way to proceed is if you can find a way of starting your business without getting into more debt. If you’re flexible on what kind of business you want to start you could favor something with low costs, like consulting, transcription or website design, which require minimal equipment. Or you could consider how to adapt your existing idea to limit overhead costs. It is said that limitations lead to creativity and this is definitely true in entrepreneurship! For example, if you are thinking about a retail business you could try starting an online store or pop up shops instead of renting space straight away. You may well end up with a more interesting business idea as well as spending less money.
Hopefully it should be clear by now that bad credit isn’t the end of the road for your business dreams. With a little fiscal responsibility, support and creativity you can become an entrepreneur and leave your financial history behind.