Starting a Business with Bad Credit

May 19, 2014 | By Michael Gillen

Coming up with an idea for a business can be hard, and putting the necessary work in can be daunting. But, where do you get the money? Well, if you have less than perfect credit, it can feel impossible? Since the economic downturn, banks are much more restrictive on whom they turn to, so getting a business loan for your startup requires more work than usual. However, like everything in life, you do have options.

The first thing you can try, which seems obvious but very few people actually do, is turn to friends and family for a loan. You may not feel comfortable asking for a large amount from one person, so, it could be best to break it up as a lot of little loans taken out from a large network. You may feel uncomfortable, but this could be the easiest

The next thing you can try is rebuilding your credit. If you have the time, one of our parts, Accion, offers what they call a "Credit Start/Promesa Loan" which is designed specifically as a short-term, small loan that you can pay back so that your credit score can be established or improved. A loan like this, once repaid, can increase your credit score significantly.

Another option available for you is finding an investor for your business. Working with an investor has its pluses and minuses. First of all, an investor will own part of your business forever (unless you buy them out), which means that, unlike a loan, they will have a say, and will become more of a business partner. This could mean free advice, but it would also mean less control. Ever see the show Shark Tank? It could be like that, although probably a bit less dramatic. If you want an investor, a great place to start is this list of New York-based angel investor groups.

If your credit is okay, but not good enough for banks, there are non-profits out there that will make a loan to you. They all offer different loans with different requirements, so the easiest way is to navigate them is by making an appointment with us and going over your unique situation and finances.

The last way I'm going to talk about today is crowdfunding, where you raise money through the Internet. Basically, you put your business idea on a website and people around the world each contribute small amounts to make a large loan to you, usually at zero interest. One of the newest crowdfunding platforms is Kiva Zip, which QEDC is working with now. Kiva Zip requires a trustee, so, if you would to try it out, please fill out this form and we'll start working on it together.

So, do you feel that you can get money for your business? Remember: the first step is always making an appointment!