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Podcast Episode 33: How to Finance Your Startup With Bad Credit

Five Ways to Finance Your Business With Bad Credit

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  1. Bootstrapping

Many entrepreneurs bootstrap their budding enterprise before they even ask anyone for money. This may involve you just getting scrappy. Finding ways to save money from your living expense to then use those savings to build your business.

  • Reduce your rent or your overhead by getting a roommate or renting a portion of your home

  • Selling items around the house that you no longer need

  • Selling services in your free time and using the extra money towards your business (Examples of these may include dog -walking, bookkeeping, house sitting, or using skills you have at your disposal)

  • Allow customers to purchase your inventory, if possible

  • Raise your prices

2. Crowdfunding

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people from the internet. This may be ideal for you especially if you have a product based businesses. Although no one checks your credit score, you have to be pretty good with conveying your business story so that people can get excited about it.

3. Merchant Cash Advance

Merchant Cash Advance or MCAs are a rapidly growing segment of the financial services industry. These companies typically lend on your future receivables at high interest rates. An example of this can be a restaurant that needs to borrow cash to purchase a new walk-in cooler. Traditional banks may not lend to start-up restaurants due to its risk profile, but a Merchant Cash Advance company will lend to one. Their credit score threshold is low, typically not lower than 500, but their interest rates tend to be much higher. Although these companies may not be ideal, when you may ned money, these may be an option.

4. Create a Cash Producing Side Hustle or Job

When you talk to entrepreneurs, you may be surprised to discover that many may have kept their day job while they built their business or even created a side hustle while they were building their business.

There shouldn’t be any shame in keeping your day job to help fund your business and to ensure you are a financially fit entrepreneur. If you are already working as a full-time entrepreneur, maybe it’s time to find another source of income that may provide you with cash more quickly than your primary company.

An example of this may be if you are a full-time realtor. your deals may not convert into cash until 3 or 4 months, however your bills are coming in ever month. When you are just starting out that may put a strain on your cash flow. Perhaps you may consider teaching an online class as a way to stabilize your income. After all, it is now recommended for entrepreneurs to have seven sources of income.

5. Friends and family

This last one is to enlist the help of your friends and family. At this junction, you may have exhausted the previous four steps or some of them and you realize you may have to ask a cousin, a sister or friend to borrow/invest or give to your company/organization. You may be surprised at their reaction.

Christine MillsComment