Although funding a business with bad credit can be very difficult, here at Bamboo we believe that having a poor credit score shouldn’t stop you from starting your own business.
Traditional lenders look at your credit score in the same way that they would if you applied for a personal loan, making you unlikely to be accepted. On top of that, starting your own business presents the risk of not having a stable income to make the repayments, making you even more of a gamble for the lender.
However, don’t give up hope. Funding a business with bad credit is far from impossible. In fact, with some searching around and thinking outside of the box, it’s probably easier than you think.
Funding a business with bad credit – our tips:
Tip #1: Look for specialist loans when funding a business with bad credit
Don’t waste your time applying for traditional loans from high-street banks. Instead, look for companies that specialise in lending people with bad credit money to start (or enhance) their business.
In particular, look for companies that offer alternative business funding. These companies use different underwriting techniques to traditional lenders, and these techniques give you a much better chance of being accepted for a loan that’ll give you the cash advance you need to get started.
For a start, these techniques take into consideration how your business is performing at the moment (or, if you haven’t started trading yet, how they think it will perform). They use all sorts of non-traditional information – from data and market analysis to potential customers and social media footprint and online presence – to get a much better idea of how your business will perform in the future. This assessment, rather than your credit score, forms the basis of their decision.
If you’re a bit confused after that (if you are, we don’t blame you), think of it like this: Alternative Business Funding is a bit like Dragons’ Den. You present your business idea to them and they do some research and decide whether to give you money towards your business. And, much like Dragons’ Den, they don’t pay attention to your personal finances either. (Don’t worry though – you won’t have to speak to Deborah Meaden either.)
However, as we’ve said before:
Use your discretion and best judgement when you’re looking into Alternative Business Funding. Keep a keen eye out for sneaky clauses in the contracts or extremely high interest rates. At the same time, don’t be afraid to look outside of the high street for funding options, there are lots of better and more suitable deals available for businesses than are available from high street banks.
Tip #2: Think outside of the box when funding a business with bad credit
If you’re not sure that your business would qualify for Alternative Business Funding (perhaps you’re in a competitive industry and it might take a while to get off the ground), it might be time to think outside of the box.
If you’re looking for a cash injection, but aren’t interested in using a traditional loan company, it might be worth considering peer-to-peer lending. Much like borrowing from a friend, you can also now get a business loan from a complete stranger online.
Peer to Peer Lending sites have been designed to create a space that helps you to borrow from individuals that are willing to lend you the money you need. In many cases, these people are willing to offer you much better repayment terms than you’d get from a bank and can lend you enough money to keep you afloat until your business starts to earn money.
Tip #3: Take out a personal loan designed for those with bad credit
If you’re not interested in Peer-to-Peer lending, then you can get an injection of cash for your business by taking out a personal loan. Guarantor loans and unsecured personal loans that have been designed for those with bad credit can lend you up to £8,000 to get your business going.
Further, guarantor loans are a great way for your family to help you start a business, without having to dip into their own pockets. By simply vouching for you with the lender, they can help you borrow a wad of cash to get your business off to a flying start.
(If you’re starting out on your own, it might also be worth checking out our post on getting a loan when freelancing. Although the particulars may be a little different, the rough situation is the same – you’ve given up traditional employment and a regular income, which are key factors when applying for credit when funding a business with bad credit.)
At Bamboo, we offer personal loans and guarantor loans that might be able to help you out when you’re just starting your business. To see if you’re eligible, why not take our eligibility test? If you’re successful, the money could be in your account within 24 hours. (Representative 49.7% APR.) A guarantor may be required.