How to Start a Small Business With Bad Credit
If you have bad credit, you know how hard it is to get things accomplished. You have a hard time getting a car loan, home loan, or even a cable account in some cases. But what about starting a business? Maybe you have a magnificent small business idea, but you don't have a clue as to how to get it off the ground due to your bad credit. The key is to lower your expectations to reasonable levels, use cash, lower expenses, and develop creative methods of advertising your business.
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Instructions
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First, you must choose a concept that requires a very low investment when you are starting a small business with bad credit. You may have to compromise on your ultimate dream for the time being. The best business to start when you have bad credit is a service business, because you are not required to make an initial investment in tangible products. Later on down the line, when you make enough money from your small business you can think bigger. So for example, maybe you have a dream of starting a computer business for selling CPUs and parts. Instead, start off giving computer advice and repair services to customers and grow from there.
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Apply for a business license and small business name for your company with your state. While you probably won't have to pay a fee to apply for your license, you will most likely have to have cash available to register your business name and for other business services.
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Since you have bad credit, it is unrealistic to consider getting a small business loan to finance your business from a regular bank. So instead of a small business loan, ask your friends and family to invest in your business. Discuss a reasonable return that your family members can expect from their investment and hold to your promises to your loved ones, regardless of what happens with your business.
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Contact web-based lenders (such as Prosper.com) to see if someone is willing to give you a loan for your business even though you have bad credit. Keep in mind that these small lenders usually also look at credit rating above all other factors when making a decision about whether to contribute their money towards your goals. Sign up for an account at Go Big Network (see "Resources" for a link) to look for angel investors or solicit possible investors in your area by posting a short description of your business at Craigslist (don't be too detailed about your plan in this public forum; just let them know that you'd be happy to send a short proposal to interested parties). If your idea is profound, an angel investor may give you a shot even if your credit is less than perfect.
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Publish press releases to promote your business; at least once a month. This is the cheapest and most effective way to advertise your small business to the masses with a limited budget. You will reach Companies like PRWeb (see resources for link) allow you to submit a press release to thousands for as little as $40.
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Produce your own business cards. You can do this by purchasing business card paper from your local supply store, using the business card templates in Microsoft Word (you may need an internet connection for access), and printing the sheets on your InkJet printer. Have a reasonably priced graphic designer ($20-$30 per hour) produce a two-sided, color, 4x6 flyer advertising your business and have it printed on high quality paper that can't be torn. Hit the streets with your business cards and flyers to talk up your business and give people something to take home.
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Ask friends or family to rent business equipment on your behalf (you pay the bill, of course), but only if the equipment is absolutely necessary. Your credit may be bad on paper, but hopefully your word is still good with your loved ones.
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Tips & Warnings
Approach web lenders and investors with a business proposal complete with financials to show them that you are serious about your business goals.
It is unlikely that you will receive a business loan when you have bad credit because lenders already see business loans as risky investments. You should focus more on trying to get help from loved ones and saving money for your business expenses.
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Comments
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What bad advice.
