Categories: Finance

How Young Entrepreneurs Can Overcome Poor Credit

One of the biggest challenges for young entrepreneurs when they are trying to start up a business is of course securing sufficient funding. The most common hurdle is the fact that they have not yet managed to build up a good credit rating. Let’s take a look at some of the ways to get ahead despite a poor credit rating.

A credit score is fairly important when it comes to raising finances for your business, the higher the score the easier it will be to get loan or some other form of financing. However, it is not the be all and end all – you can still get funding with bad credit. The key is choosing appropriately so that you can begin to build up your credit so that when the time comes to move to the next level your business will have sufficient credit to do so.

Do Not Depend On Credit Cards & Bank Loans

It has recently been suggested that only 25 percent of entrepreneurs use traditional credit cards and bank loans to meet their start-up costs. That is actually great news for those seeking funding as it means that the majority of entrepreneurs are getting money from sources that are not so dependent on credit scoring. There are plenty of ways to fund a start-up which do not involve taking out a bank loan.

Check Out Alternative Lenders

When you have bad credit, it is usually a better idea to look at non-traditional lenders when you are hoping to borrow money. Young entrepreneurs may find it particularly useful to look at web-based lenders and micro-lenders as an option. Not only will these alternative lenders allow you to borrow despite your bad credit, but they report to the credit bureaus meaning that paying them back is going to improve your credit score.

There are many lenders who cater exclusively to those with bad credit and although the interest rates can be higher, securing and repaying a loan from one of them will help to build a better credit score for the future.

Do Not Overlook Grant Opportunities

While they do not help to improve your credit score, there are a number of grant opportunities out there for young entrepreneurs. It will take a lot of effort and hard work to locate and apply to these programs, which are usually offered by the government, but if you are successful the outcome will be well worth it.

These grants are not based on your credit score and as such can be a great way to secure an alternative source of funding for a new business venture.

Try To Reduce Your Expenses

Wherever possible, it is good to reduce your initial expenses. The smaller the amount you need to borrow the easier it will be to secure a loan. You can reduce your expenses by seeking out assistance from friends and contacts. For example, is there a spare office in an old employer’s building that they would let you use for a lower cost? Do you know a graphic designer who would offer some free logo design assistance to help you get started?

Having bad credit is not something which can end your dreams of starting a small business. Creativity is something that all young entrepreneurs should have and with some creative thinking and a lot of research it is possible to overcome bad credit in order to find the funding you need to get started.

Hugh Tyzack is the founder of guarantorloansdirect.com , a lender specializing in loans for bad credit. When he is not working, Hugh enjoys listening to music and playing the piano. You an find out more by visiting his website or by finding him on Twitter @badcreditloans8 and also on Google+.

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.

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View Comments

Zoe Campos says:

11 years ago at 7:15 AM

Thanks for suggesting that I look for non-traditional lending companies if I want to purchase something although I have bad credit. I'm still trying to fix my record but I also feel impatient about getting a house. I'll try to follow your advice and explore other financing options that don't require my credit score in order to get approved.