As we are becoming a credit driven society, entrepreneurs as well as consumers are feeling the negative effects of having low credit scores.
But surprisingly statistics show that approximately 25% of start-up funding for small business owners and entrepreneurs come from traditional bank loans and credit cards.
This means that 75% of start-up funding comes from other sources. With banks and credit cards taken out of the start-up funding equation, it stands to reason that the other sources have to be less dependent on your credit history.
However, less than perfect credit is something that should not be ignored. The funding sources you seek should include a strategy to improve your credit scores. As your business grows you want to be on track for bank business loans, lines of credit and business credit cards.
4 Sources for Funding:
Relatives and Friends
Not surprisingly, more than 50% of all start-up costs for new entrepreneurs come from friends and family. America thrives on entrepreneurship and friends and family desire to see loved ones succeed and follow their dreams.
If your credit is weak you are more likely to get a short-term loan from a friend or family member because they evaluate your character, not your credit scores.
Entrepreneurs and small business owners generally have a difficult time obtaining start-up funding from traditional banks and venture capital firms. Private lenders may be the solution. Private lending requires less formal processes and often have lower lending and credit criteria.
Private lending is also a good option for small business owners who do not want to give up a percentage of ownership often required by venture capitalist and angel investors.
Private lenders look for a sound business plan to support your business venture, an excellent contingency plan, realistic financial forecasts along with experienced business owners who have made some kind of financial contribution to the business venture.
Finding a private lender will take some research but it can be a very rewarding journey as they often fund business ventures the banks reject. They can also be a great resource by offering helpful suggestions and creating a loan repayment plan that comfortably fits into your business structure and growth plan. One website which brings entrepreneurs together with private lenders and where you can post your project for funding is: www.gobignetwork.com
As an alternative to private lenders, a company that accepts all types of credit such as Prosper is a great option. Prosper has loans loans tailored to fit your needs and budget. Loans are available from $2,500 to $25,000. Apply online for a Prosper Business Loan.
An alternative to a business loan is a personal loan for less than perfect credit. Sole proprietors with poor credit may be able to get a personal loan to cover business expenses. Apply online for personal loan for less than perfect credit here.
Micro Business Loans
Finding a micro-lender in your state may be difficult but it is well worth the research. Many micro-lenders are small and do not have websites; however, they can be great sources of capital for entrepreneurs with bad credit.
They offer flexible loan terms and report payment history to the three major credit bureaus. Microloans typically range from $1,000 to $35,000 read more about Microloans.