Are you trying to start a business but fear the consequences of your bad credit?
Well, that’s a reasonable reservation because if you didn’t know, a staggering 50% of start-ups never get past the first four years.
Another problem that can hinder your success is that funding is harder to come by. Established brands that found success early on have made investors risk averse.
Those are two daunting problems for someone that has a poor credit rating.
But it doesn’t have to be the end of your dream business. In fact, solutions like no credit check business loans exist to help you build your company.
Before you admit defeat, here are a few facts about business, loans, failure, and why bad credit shouldn’t stop you.
The Facts about Failure
Whether it’s large or small scale, failure is always a possibility in every business. Yet, the examples of company failure are complex.
The first is that your company may run out of money. In this situation, funding becomes difficult to secure. Stagnant income snowballs into loss over time.
If you think that solving this problem means using personal funds, think again. Relying on your savings puts you deeper in debt and you’re trying to avoid that.
A slow trend into losses is also very unattractive to potential investors. Because it means the business has reached its full growth.
Businesses can also become stunted because of the product itself. Starry-eyed entrepreneurs often see their idea as a new innovation in a stagnant market. The failure here is that no research was done on whether there is a market for the product in the first place.
Products that don’t sell become losses over time, and then a startup goes bankrupt. It’s that simple in some cases.
One final reason why startups fail is team cooperation. Sometimes businesses start because a few friends have a great idea and they decide to act on it.
What they forget along the way is that close friends don’t make a good team. In fact, friction and history cause resentment among people in professional environments.
A team that has members whose skills are subpar also drag a whole business down. Especially during the initial stages of growth. A time where efficiency is critical to your success.
It’s partnerships that are better for companies. Because two people’s complementary skill sets can achieve more.
Bad Credit and Loans
A terrible credit rating locks a lot of doors in the financial world. As automation becomes more prevalent in banking institutions, individuals boil down to numbers.
In your case, it means that if you’ve had a run of bad financial luck, banks won’t take your personality into account. When you’re applying for loans, they need to know you’re responsible.
But credit ratings can’t stop you from building your own company. You’ll have to learn how to compensate for your problem through other means.
Taking a step back to deal with your score is a solid first step. Catching up on payments is a good sign for lenders. It shows them you own up to your obligations.
Settling your accounts is another solution to your debt problem. If your monthly payments become unmanageable, that counts against your credit. To settle these collections means you work with the agency to make this debt easier to work with.
Debt consolidation can also be an option if you are in a more precarious financial situation.
It sets the amount to lower than what you owe and changes the monthly collections. Your credit score will still take a hit, but failing to pay the old plan on time is much worse.
All this boils down to how well you handle fiscal responsibility and stability. It may not improve your score in a major way. But for a lending company, those payments can be positive things.
Presenting a strong business plan can also show off how serious your ambitions are. It has to be well researched and offers something unique to the market.
Meeting a demand or a niche shows them where you intend on getting your revenue from. The plan also has to deal with the long-term and how you plan to grow your company. A projected budget also gives them a sense of how big the loan will be.
These two tips can be big steps towards getting your loan application approved.
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Credit Score Loan Size/Amount Loan Term APR Origination Fee All can apply $100 - $15,000 1 - 60 4.99% - 1.386% Varies by lenderCredit ScoreAll can applyLoan Size/Amount$100 - $15,000Loan Term1 - 60APR4.99% - 1.386%Origination FeeVaries by lender
The Types of Loans
So now that you’re improving your score, you need to learn about different types of loans. Outside of large banks and lending companies are many smaller opportunities. There are even establishments that offer start-up business loans for bad credit guaranteed.
What matters here is figuring out which one suits your needs the best.
Getting a personal loan is a good place for you to start. If you’ve got a lot of trust built up with your family and friends, they’ll likely want to see your dreams come to fruition.
Although they can’t lend you the largest sums of money, their contributions can supplement your intended capital.
The only downside here is your reputation. Failing to meet your goals or bankrupting your business can be embarrassing. Especially when the money comes from people close to you.
Outside of your family, there are also private lenders who take an interest in your product. Usually, it’s better to find the lenders you know you can trust. If that feeling is mutual, then an informal agreement may be within reach.
You can find many micro-lenders on the web and in the real world. The loans can be a bit smaller, but you may find one that offers business startup loans with no credit check.
Certain private companies also lend money at reasonable interest rates. But this is where your bad credit comes into play.
Since they consider you a risk, private companies can raise those interest rates. A loan like that is risky, as the monthly collections and the upkeep of your business can become heavy.
If these options don’t seem right for you, then it’s time to consider alternative small loans with no credit check.
These loans offer breathing room if you have a bad credit rating. Because they don’t pull up your credit history, no mark is made for many loan applications.
That means you won’t risk further pulling your score down.
They can also offer larger loans up to $100,000 depending on who you transact with.
Of course, the danger here is certain lenders use predatory borrowing tactics. While not every credit-check free loan comes with strings attached, it’s better to err on the side of caution.
Companies with No Credit Check Business Loans Options
Companies that give you the option of small business startup loans with no credit check aren’t rare. It’s the trustworthy ones that can be difficult to find though. Here are a few of the most notable ones.
Square Capital is not only a lending company, they also act as a mobile point of sale. This is one of the companies that can lend you up to $100,000. But, they only work with businesses that already use their payment processing application.
The loans are also limited because the company is the one who offers them. Since they can see the transactions on your account, loan offers can become rare.
Square Capital is a very secure choice, but they need you to work with them before they work with you.
Crowdfunding is another way you can get a loan without having a credit check. Among them, Kickstarter is the most established. On it, you can pitch the idea for a business and gather funds from people around the world.
Backers of your business do not leverage interest for their investment. Rather, they do it for the rewards you promise them on your pitch page.
Yet, the trick of the system is the popularity of your idea. If your pitch doesn’t strike a chord with people, then you’ll have to pitch another idea.
This platform is also better if your plan is solid. Being able to deliver exactly what you promised at the end of the project duration is key to future funding.
Which Platform Works Best for You?
Between these two options, neither have a significant edge. For a startup, Kickstarter can get you a big injection of capital. But your idea can drop below other pitches as quickly as you post it.
Square Capital is a strong choice for entrepreneurs in need of a payment platform. Along with the option of an online loaning service. But if your business fails to perform, the chances of a second loan are slim.
Ready to Start Your Business?
If you’re still feeling unsure, those aren’t your only two options in no credit check business loans.
But before you do that, making sure you repair your credit score is a good step forward. Researching other lending companies will also serve you well going forward.
Read about them here, if you want to learn more about how you can blaze a path towards your future business.