For the entrepreneurial visionaries out there, starting a business means bringing your ideas to the market and changing it for the better. Whilst doing so, it’s important to bear in mind your credit score. We’ll help provide specific credit score tips for entrepreneurs like you.
Starting any successful business requires more than ideas and drive, however. It also needs a vast amount of capital, as there are a wide variety of costs involved in creating a new business and growing it effectively.
Most entrepreneurs turn to borrow money in order to fund the business of their dreams, but this can be tough if you have a bad credit score.
A bad credit score doesn’t necessarily mean that you can’t access the funds that you need to start your business; it just means that you’ll have to work harder than most to get them.
With a little ingenuity, research and commitment, you can find sources of finance to finance your company. Here are 7 tips to help you get started finding the business finance options that will work for you. Note that not all of these credit score tips for entrepreneurs may be relevant to you.
1. Improve Your Credit Score
If your credit score is only slightly worse than it should be and you have the time to improve it before you officially launch your company, then you should do so to reduce the costs of your start-up financing. You’ll have more options if you manage to reduce your credit score, meaning you’ll be able to find the best financing solution for your new organisation. Techniques such as balance transfers and personal loans can improve your credit rating and allow you access to every start-up lending option on the market. Find out about how these solutions stack up against each other by reading this article on balance transfer cards vs personal loans, so you can find the most cost-effective solution to help you get on the road towards becoming a thriving business owner.
2. Pare Down Your Budget
When you’ve got poor credit, you need to make sure that your budget is as trimmed-down as possible until you’re able to improve your credit score and make your business profitable. If there are scalable options that you can choose instead of immediately paying for solutions, or you’re able to apply for credit or asset finance, then you should explore these options to ensure that you start your business as cost-effectively as possible.
3. Apply For Grants
Depending on your business size, sector and services, you may be eligible to apply for grants from organisations and governing bodies. Review the grant options available in your market and local area, so that you can see how much you could potentially receive. Apply for any grants that your firm is eligible for, but don’t rely on the money until you’ve been informed that your firm has been approved to receive it.
4. Explore Asset Refinancing
If you do not have a lot of cash to spend on your business, but you do have high-value assets such as property, land or vehicles, then you can explore refinancing them or using them as collateral. Many lenders will accept a variety of assets as collateral, so you’ll be able to find a way to secure a loan with a good interest rate. This approach is riskier than many of the others, because if your business fails, then you will lose the asset, but the risk will be worth it if you put the effort in to drive your business towards profitability.
Out of all the credit score tips for entrepreneurs, this is one of the most prevalent for business owners as refinancing companies will use financial institutions to check your credit score. In some instances based upon your rating, will you be given an interest rate and a credit line.
5. Ask Friends And Family
If you have friends or family members who have savings, consider asking them to invest in your business or give you a loan. They will be able to provide you with an interest-free or low-interest option, meaning that you can keep your costs low. If they want to invest the money in your company, then they will own a portion of it. They can choose to be a silent partner, or take on a more hands-on role, supporting you in driving your new business to success.
6. Seek Out Angel Investors
For entrepreneurs who don’t have wealthy friends or family, or who don’t feel comfortable asking them for financial support, Angel Investors can be the perfect solution. An Angel Investor is someone who invests in your business but isn’t known to you before they join you in this exciting adventure. Often, they offer advice and support in return for their investment, meaning that you’ll be able to make the most of their expertise in the business market as well as use their money to finance your company.
7. Try Crowdfunding
Another alternative way of attracting investors to your business is to share your story on a crowdfunding platform. Through this approach, you’ll be able to get small amounts of money from a wide range of investors, rather than a large amount from just one. The downside to this approach is that you may lose control of more of your company than you intended to, so make sure that you have accurately valued your organisation and are able to ask for the right amount of money before you start appealing for investment.
Financing your new company can be a challenge if you don’t have a good credit score, but these tips should help you to overcome this issue and start your business on a positive note. Read more about the myths around repairing your credit score.