Business Startup Loans With Bad Credit

For owners of startup businesses with bad credit borrowing money can be almost impossible.

Banks will generally not loan money to owners of startup businesses whose credit score is below 640. Fortunately there are other financing options for people who have bad credit but want to start businesses.

Angel investor

The best option is to find an angel investor, an angel investor is a private investor who invests their money in startup businesses. These investors are looking for startup businesses that might make a lot of money in the future. This means that angel investors lend money based on business plans rather than on credit scores.

An angel investor will generally take a percentage of your business or stake in exchange for financing. A drawback to getting an angel investor is that the angel investor will own part of your business. An advantage to angel investors is that they can loan you as much money as they want.

The first step in finding an angel investor is to prepare a business plan. There are courses in business plan writing and business plan software available. There are also groups such as organizations of retired executives and business schools that will help you do so. You can also hire a business consultant to help you write a business plan.

There are many websites that can help you locate angel investors. There are also programs through the federal government, business schools, and local governments that connect angel investors with businesses.

Venture capital

Another kind of loan you can get if you have a potentially lucrative startup is venture capital. Venture capital is money made available by investment bankers and others in exchange for a stake in a new business. Sometimes venture capital is backed by questionable financing vehicles such as junk bonds.

A big advantage to venture capital is that it is speculative in nature so venture capitalists will loan to any business that has a good business plan. As with angel investors venture capitalists might be over willing to overlook bad credit records if somebody has a really good business plan.

There are many venture capital firms out there some of which specialize in particular areas of the economy like high technology. Venture capital firms can be located online and through community groups.

Other forms of business startup loans with bad credit

Other kinds of loans are available to startups including some that people might not think of. Vendors and suppliers might be willing to loan a start some money or supplies and inventory.

The federal, state and local governments all loan money to new businesses. Many local governments in particular loan money to those who might start a business that could bring jobs to the community. The way to find out about these loans is to contact the federal Small Business Administration and economic development authorities run by local governments.

Those starting businesses shouldn’t neglect their communities either. Groups of people such as immigrants from the same country might be willing to loan money to a member of their community. Business leaders and others in your local community might be willing to loan to locals who start business. This means that getting involved in your community might lead to a start up loan.

You should also contact people who know you such as other people in your industry or former employers. They might be willing to loan money to you if they trust you.

Startup loans for people with bad credit are out there. It just takes a bit of searching to find them.