It should come as no surprise that it is not easy to obtain small business loans if you have bad personal credit. That can make starting up a business with bad personal credit a little more difficult, but it is not impossible.
Develop Your Business Credit
One way to make your loan applications more attractive is to build your business credit apart from your personal credit. While it is not the fastest method of obtaining small business loans, it may very well be the surest way to get the money you need for expansion or further development.
The first thing you will need is a federal tax identification number. This is easy to obtain, and will replace your social security number when making financial transactions related to your business, and also when filing taxes for your business.
Once you have your federal tax identification number you can take the steps necessary to begin accumulating credit for your business:
• Open vendor accounts in your business name
• Open a bank account in your business name
• Apply for small business credit cards in your business name
Once you have established good credit in the name of your business, you can use that to apply for traditional small business loans from local lenders.
Getting Started Faster
If you don’t have the time or the resources to fund your own startup you can check out the many social lending possibilities available online. Social lending sites are appealing, because many times all you have to do is convince a potential private investor of the validity of your idea and your ability to make it work. Social lending sites are the internet connection to venture capitalists.
If you are already in operation, but don’t have enough time invested in your business to have built up reasonable business credit, consider getting a cash advance against accounts receivable. These loans are like payday loans. You will need to provide the lender with a full account of your receivables, but it provides you with cash flow to buy new equipment, fund payroll or expand without waiting for the money you have coming in.
