Most adults are unsure about how credit scores work and what influences the scores. No one pays much attention to the credit scores or credit records unless they need to borrow money from banks, financial institutions, and credit unions. Your credit record can determine the kind of home you live in, your lifestyle choices, your business success and your monthly expenses. Now, years of neglect often show on the majority of the credit records. Only when people face the real challenge of finding a business funds or unsecured loan, they start wondering if there is a way to skip the entire credit check process.
What are the advantages of good credit scores?
If you are interested in traditional financing methods, it will be impossible for you to find a lender who does not check credit scores. These are options for people with excellent financial profiles and credit scores. Proper credits bring with them a flurry of great offers including low-interest rates on unsecured loans, reasonable APRs and a chance at lump sum loans from reputable institutions. Business credit scores also contribute to the lender’s decision-making process. Anything above 640 on the FICO score means you can apply for startup loans and small business loans from the leading business finance institutions and online funding companies. The chances of getting a loan on stellar terms increase exponentially with increasing FICO scores. If you have time, you can think about working on your credit score before applying for a loan from any of the small business loan companies, banks and credit unions.
What are the options for weak credit score holders?
However, that does not give you a reason to believe that bad credit score holders do not have any shot at getting good business loan offers. You might have a below average FICO score and a bad business credit score, but that should not stop you from dreaming about your own startup or small business. It is quite reasonable for new entrepreneurs to find it challenging to get a good loan offer from the first few lenders they approach. Apart from their credit score, the decision also depends on their experience and business proposal. National Debt Relief sites can help you understand all the factors that govern your loan possibilities right now. To avoid all the complications and find the perfect loan that can power your start-up, you can try the following half-a-dozen options to finance your new startup or small business:
Small business owners and start-ups can utilize credit cards to pay for vendor costs, utility bills, low expenses regarding maintenance and more. Always remember, credit cards are easy to use, and they rake up a lot of costs over the months. They come with higher interest rates and stringent repayment terms. Only use your card to pay for expenses that you can secure later from other parties or for short-term investments that will generate the bill amount.
Crowdfunding is one of the better ways to raise money for all kinds of businesses big and small. Large projects and small start-ups have been utilizing crowdfunding platforms for years on end. Several online platforms help you solicit funds. You can design your own campaign using your business proposal and prospect. The exciting bit is you can pay the “donors” in kind instead of cash, which is why it is also known as reward-based crowdfunding.
Equity crowdfunding is also an option for many small businesses and start-ups that have a fast growth prospect. The platform can put you in touch with a public pool of investors, who are ready to finance new businesses in exchange for stock ownership. Crowdfunding is an excellent option for the first timers and new entrepreneurs since it has no credit score requirements for the applicants.
Small business grants
It might be rare to find a government grant or financial aid from private non-profits, but it is surely not impossible in the USA. It is one way to get your hands on “free” capital. There are several small business grants for US ex-military personnel and special grants for women, and you can check out if you are in dire need of cash without consequences.
The web has made it much easier to find individuals who may be interested in providing funds for your startup. Just like crowdfunding, venture capitalists do not check credit scores and business credits. All the check is your business idea, prospects, and your enthusiasm. They are more likely to interest in high-risk businesses since they are also the ones with high growth rates. Now, they are interested since they often meet with huge returns once these start-ups and SMEs take off. Even companies like Twitter and Facebook started out with the help of venture capitalists like Jim Breyer in the early days.
Personal loans to fund business
Personal loans can come with a higher cost in terms of interest rates and processing fees. Nonetheless, if you do not have any other immediate source of cash for an emergency business expense, you can approach an unsecured loan company. They do not want any expense sheet or explanation for your costs. Therefore, you can spend the cash amount to fund new investments and projects. Just like credit cards, you should not use personal loans very often. Use this source of funding only when you are in dire need and borrow only the amount you can pay off with interest.
Ask your friends and family
It is one of the best options for amateur business owners. Convincing your parents, siblings, and friends for initial funds for the business can be much easier than convincing a corporate bank or a credit union. Sit them down and give a presentation of your business idea. You can offer them business equity in return for their investment in addition to the timely payments. However, always remember the cost of failure will not just be professional here. It is bound to become personal. So tread very carefully.
These six alternative funding options are great for anyone looking for a break from the tedious formal applications, credit check methods, and financial profile checks. If you want to best deals in the future, start working on your credit score from today.