9 Ways To Raise Funds For Your Small Business When You Don't Have Good Credit
When a growing small business needs cash to expand, the average small business owner heads to their neighborhood bank for a loan. Unfortunately, if you have bad credit, getting that loan can be difficult, if not impossible. The credit scores required for traditional loans as well as SBA-secured loans can be out of reach from some hard-working business owners with less-than-stellar credit histories. Don't worry; there are options available, if you think a little outside the box.
1. Friends and Family: Yes, you can ask your friends or family members for money. You should, however, be professional about it and draw up a contract that clearly outlines repayment terms and interest. Yes, you need to pay interest.
2. Payday Loans: While payday loans may get a bad rap in the press, they serve a purpose and have pulled more than one small business owner out of a jam when equipment breaks in the middle of a job or payroll needs to be paid. The interest rates and terms are tough, but the cash is readily available.
3. Partner: If you are running as a sole proprietor, have you considered taking on a partner? For a cash investment, payable immediately or in installments, you can sell a percentage of your business to a partner. Moving forward, you would would work together to take the business to the next level.
4. Pawn Shop: Contrary to the dark, dingy places you often see in crime dramas, today's pawn shops are clean, safe, and efficient. If you need cash and have something of value for them to hold, they can help. The process is different at every store but, in general, they give you a percentage of your item's value and you make payments over an agreed upon time until the item is yours again.
5. Invoice Factoring: The hardest part about running a small business is cash flow. Quite often, clients can take 30, 60, or even 90 days to pay an invoice. Meanwhile, your electric bill, rent, and payroll all have to be paid. Invoice factoring companies take those outstanding accounts and buy them from you. They pay you a percentage of what is owed to you up front and then wait for the client to pay.
6. Credit Cards: Everyone that tells you not to buy on credit has never had to keep a small business afloat. Yes, depending on credit cards is never wise, but sometimes entrepreneurs do what they have to do. If you do the research, you can transfer balances to cards with introductory rates of zero percent.
7. Peer-to-Peer Lending: The concept of peer-to-peer lending emerged during the recent economic downturn. The idea is to connect independent investors who want to make a decent return with small business owners who need a loan, regardless of their credit score. The two parties work out their own terms and interest rates, while payments are generally made through the online platform.
8. Sell Stuff: Did you know that, in order to start Apple, Steve Jobs sold his Volkswagen minibus and Steve Wozniak sold his Hewlett-Packard calculator? You can sell items on eBay, on Facebook garage sale sites, or even at a real life yard sale. If it has been collecting dust in your attic or basement, put it to good use for your business and sell it.
9. Web-Based Microloans: Microloans are small loans, usually under $500, for small business owners. There are many websites that offer such services—just be sure to search for online reviews and Better Business Bureau complaints first. That small amount could be just what you need to move forward.
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