Recent statistics suggest that in 2023, the startup market will expand. Experts believe that two in five Americans are planning to start a business. One of the biggest challenges they face is financial management.
Starting a business takes working capital. However, if you have no capital and you have bad credit but you have a powerful concept for a business, what is an entrepreneur to do?
There are fantastic financial tips that can help you get off the ground.
While bad credit can make it more challenging to secure funding with a traditional lender, it does not mean that you cannot find lending options to help you start a business. There are still finance options out there if you know where to look. Building a successful business requires brilliant financial management.
Despite bad personal credit, here is what you can do to start a business.
Create a Separate Legal Entity
Register your business with your local government so that your credit is separate from your personal. You will want a FEIN, so go ahead and signup for a Federal Employer Identification Number. Then, register for a Dun & Bradstreet number.
By following these steps, you can begin building business credit.
Bootstrap Your Business
Use as much of your own funds as you can and reduce costs for the start-up as much as possible. Learn to do what you can on your own. This way, you will not have to pay for someone else to help you.
The key is to use your own money for what you need.
Use Store Credit For Purchases That Report to the Bureaus
When you need to buy equipment, this is a perfect opportunity to build up your credit. Make your purchases with store credit, but choose a store that reports to the bureaus. It is easier for a business to access store credit than other small business funding options.
Apply For a Business Credit Card
When you have some positive activity attributed to your credit history, it helps boost your company finances. This is a good time to go for a business credit card. A small limit will do.
You may not get an unsecured business credit card right away, and if not, the next option is a secured business credit card. The difference is that you will need to put down a deposit. Still, it will give you an opportunity to build credit.
Use PayPal
You will need a payment processor, and be sure to include PayPal. PayPal does not perform credit checks.
You can accept credit card payments anywhere, anytime, with PayPal. All you need is an Internet connection.
Traditional merchant accounts consider your credit score. They will use this detail to decide whether they will approve an account for you.
However, there are providers who help with a bad credit merchant account. We recommend checking out Zenti for further details.
Build Your Client Base
The best way to generate income is with a loyal client base. Lenders will see in you a favorable light when you have a consistent income coming in. It also gives you more options, both lending and investment opportunities, when you can improve business finances.
Grants
There are options for people in need. The government offers private grants, including grants for new business owners. In fact, recent statistics show small businesses employ 61.7 million Americans, so it is everyone’s benefit to help small businesses start and grow.
Micro-Credit Organizations
When you start a business, these organizations can help you get capital. They especially assist once a traditional lender, like a large bank, turns you down. Often, a micro-credit organization is a nonprofit group, and usually, it is backed by the SBA (Small Business Administration).
The micro-credit organization understands the challenges you are facing. When you start a company, it is hard getting off the ground. Recent statistics reveal that approximately 20% of new businesses won’t make it past one year in business.
Short-term success can be easier than long-term success, the kind that gives businesses staying power.
Not only can micro-credit organizations help you build company finances, but they can also offer guidance so you can be successful in the long term. Financial management is complex, and if you are not an expert, you should look to micro-credit organizations for guidance.
Social Lending Sites
Over the last decade, there have been many social lending sites that are available online. Basically, with a social lending site, its members can borrow and lend to each other. It can be easier to get funding this way because you are telling your story firsthand to the person or entity funding you.
Rates for these loans are usually lower, too than what a traditional bank would give you. Funds from a social lending site can be used for any purpose. This includes both running a business and requesting funds to start a company.
Financial Tips to Start a Company
Even if you have bad credit, do not let this prevent you from starting a business. With these financial tips, you can launch your startup. Create a business entity, bootstrap your business, use PayPal, apply for a merchant account, build your customer base, consider grants, consider micro-credit organizations, and check out social lending sites.
These are all great ways to boost your business finances and work your way toward launching a very successful business.
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