Raising Money

Bad Credit Needn't Stop You Starting a Business Part 1

Written by Jay Shapiro for Gaebler Ventures

If you've got bad credit you've no doubt had a few eyebrows raised at you when you say you want to start a business. Ok, it's not going to be easy, but it's not impossible for you to raise capital.

Any budding entrepreneur looking to get his business launched will face certain challenges.

But things are far tougher if he's got a poor credit history. The recent financial downturn throws yet another proverbial spanner in the works. In short it's not always easy raise venture capital.

Fear not, even if your credit history is less than perfect, there are still ways and means. But you need to be determined and will definitely have to work harder to get your start up cash than your squeaky clean cousin.

Where to look for funds first -

Most business owners need some form of capital to set up their companies. They may pull the cash from:

• personal savings accounts
• retirement funds
• loans from close friends or family members

It's rare than anyone possesses all the necessary funds required to fully launch a business. Often it's a struggle to get enough money together - bear in mind there are numerous costs associated with business start up.

In addition, a bad credit score or even lack of credit history will make it far more difficult for prospective entrepreneurs to secured capital for marketing campaigns, the payroll, or even something as seemingly simple as office supplies.

Whatever liquid capital, or cash to hand, a business owner has ploughed into his new venture it most of it will probably end up invested in the overall progress and expansion of the business. While that solves the problem of initial set up costs, it leaves very little in the pot for day to day running costs. Bear in mind, if all your ready cash is sunk into start up you need to find other ways to fund the regular purchase of things like:

• stock
• rent
• vehicle costs
• utility bills

Borrowing when you have poor credit is a tricky area, but nothing is impossible.

Consider the following options:

• Social Lending Sites: Social lending sites allow registered members to present their scenarios and borrowing requirements to funders. Good for non-secured working capital. To gain access to capital from these sources you need to put across your story in a detailed and honest way so that prospective lenders can appraise your situation accurately. Interest rates with these kinds of loans are often lower than those associated with traditional lending institutions. While funding from Social lending sites is categorized as personal loans, the money can be used for a commercial purpose like starting your own business.
• Micro-Credit Organizations: Micro-Credit Organizations exist to help start up and newly growing businesses to obtain capital if they have been refused credit by other lenders like banks or loan companies. These organizations are usually non-profit groups, supported by the SBA (Small Business Association), and are sympathetic to the hurdles business owners are up against when attempting to set up their business ventures. Micro-credit organizations can also provide guidance and are geared to help ensure long-term success for your business.

Jay Shapiro is a freelance writer based in the UK. Jay has a particular interest in the emotive aspects of the entrepreneur's character. "Alongside the nuts and bolts of business, the character of the person is often the ingredient responsible for success."

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