Don't let bad credit stymie your business aspirations

By Tristan Anwyn

Does bad credit have to stymie your business aspirations?

If you have bad credit, it's easy to fall into the trap of thinking you'll never get the loan you need for that start up or to grow your business.

RELATED TOPIC: Bad credit and how businesses are tackling it

While it's true that borrowing large sums could be difficult with bad credit, credit problems don't have to be the nail in your business coffin.

So just what can you do if you need funding for your business, but don't have good credit?

Look beyond banks

As the article, "Just Exactly What Is Bad Credit?" points out your credit score is used to assess how much of a risk you are to loan money to.

If you're showing unpaid debts or skipped payments, that won't inspire confidence in a big lender such as a bank.

However, banks are not the only lenders.

Online lenders have risen in popularity in recent years, and can be a viable alternative if you don't have the best credit score. Online lenders are more willing to take risks.

Do be aware that online lenders often charge higher interest rates than banks, and are not as strictly regulated. That's why you should always read the fine print in detail, and look to reviews, ratings and personal recommendations when making a choice.

Micro lending is also an option for those with poor credit.

Micro lenders such as ACCION, Grameen Bank and Kiva provide small loans (typically around $1,000- $5,000, though amounts may vary). Micro lenders look beyond your credit score, taking into account your passion, experience, and the viability of your idea.

Consider crowd funding or peer to peer lending

You might also consider crowd funding.

Crowd funding sites allow you to raise money by letting people know how brilliant your idea is and getting them excited about it. The more effectively you can market your idea, and your crowd funding page, the more likely you are to succeed.

Peer-to-peer lending removes the financial institution; allowing investors to lend directly to businesses.

Whether you are a candidate for peer to peer lending will depend on just how bad your credit score is, as it may still be taken into account. However, with typically lower rates and more flexibility than blanks, peer to peer lending is worth investigating.

Investigate grants

Lending isn't the only way to finance a business.

You can also look into the possibility of grants. Be wary of websites that promise to find you Government funding - getting a grant is by no means an easy route, so be wary of any company that makes it sound simple.

Be prepared to do a lot of research into what is available both for your type of business and in your geographical area.

Grants are strictly administered, but depending on where you live you might find grants available for healthcare companies, technology (especially green technology), tourism businesses, or retail in poor areas.

Clean up your credit score

If you want to help your business financially in the future, do all you can now to clean up your credit score:

  • Pay off those credit card balances if you can;
  • Be mindful of the ratio of what you put on your credit card compared to what you pay off monthly;
  • Try to consolidate credit card usage into one or two go-to cards rather than using lots of cards;
  • Pay bills and balances on time;
  • Make sure you see a copy of your credit report and query any charge or debts you feel are unfair.

Getting capital for your business can be challenging when you have credit problems, but bad credit doesn't have to spell disaster.

Be flexible and look into other lending options. Just remember to read the small print, and only borrow what you can pay back.

RELATED TOPIC: How businesses can rise to the top during a recession

About the Author: Tristan Anwyn is an author who writes on a range of topics including social media, SEO that works, and how to find funding for your business.

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