Two years ago, Fox ran the news story that almost a third of Americans have bad credit. That’s one thing for the average Joe, who mig...
Two years ago, Fox ran the news story that almost a third of Americans have bad credit. That’s one thing for the average Joe, who might find it difficult to get approval for a car loan or a new credit card. But if you are planning on starting a new business, surely a poor credit score could mean you are dead in the water right from the start?
Your credit score is a little like your family. When it’s a source of pride, you feel on top of the world, but when it has problems, it can be like a younger brother who gets in trouble with the authorities - you can’t help but feel it’s a basis on which people pass judgement on you. The good news is that every credit score is recoverable, even if you have been declared bankrupt in the past, but of course it takes time. If conventional funding opportunities might not be available to you, the 21st century is a time of alternative options. Here are some you might consider:
Families stick together
To stretch the metaphor a little further, families stick together, just like your credit rating will stick to you. If you’ve been through some tough times, there’s every chance that family and friends will be delighted to help. Everyone likes a bit of entrepreneurship and a spirit of adventure, and more than half of new businesses get off the ground with this kind of financial assistance.
Crowdfunding is go
Crowdfunding is gaining increasing levels of traction as a viable way to start up a new enterprise. The concept has that vibrant, millennial feel, it serves as a publicity and marketing tool as well as raising funds, it allows you to get a feel for the level of interest and demand, and best of all, it means no more sweaty-palmed meetings as you try to woo potential investors.
As the concept has grown in popularity, so the different types of crowdfunding opportunity have also opened out. These include the following:
- Equity-based - investors receive shares in the business
- Reward-based - investors receive some reward for the money they put in - maybe some tangible product, or perhaps just some public recognition or a shout out at a media event.
- Donation based - this is typically applicable to not for profit organizations, where people donate their money to get it off the ground, with no expectation of any return.
A fourth option is debt-based crowdfunding. However, as this is essentially peer to peer lending, your credit record will come into play, so this is unlikely to be an attractive option. The point is, however, that the diverse financing options that are open today mean that whatever lies in your financial past does not need to affect your entrepreneurial plans for the future.