When it comes to funding a startup, bad credit can be an enormous obstacle. After all, one of the first things potential investors will do is pull your credit report. If your score is low, they may be less likely to give you the money you need to get your business off the ground.
However, that doesn’t mean it’s impossible to get funding if you have bad credit. Here’s what you need to know.
The Importance of Credit Scores
According to BadCredit.org, 16% of Americans have bad credit with scores between 300 and 579. For small business owners and startup founders, having a good credit score is important for two main reasons. First, a good credit score can help you get lower interest rates on loans, which can save you thousands of dollars over the life of the loan. Second, a good credit score signals to potential investors that you’re a responsible borrower who is likely to repay any money they lend you.
That said, it’s important to keep in mind that a bad credit score is not the end of the world. There are still plenty of options for small business owners and startup founders with bad credit histories. Let’s take a look at some of those options now.
Can You Get Funding with Bad Credit?
The short answer is yes, you can get funding for your startup even if you have bad credit. However, it will be more difficult than if your credit was in good standing. Investors are always looking for signs of financial responsibility, and a low credit score is not a good sign.
That said, there are a few ways you can increase your chances of getting funding with bad credit. First, try to find investors who are willing to work with startups that have less-than-perfect credit. There are a number of venture capital firms and angel investors out there who specialize in high-risk investments.
Another option is to bring on a co-founder or partner who has good credit. This will show potential investors that someone else is willing to vouch for you and your business idea, which can increase their confidence in you and your company.
Finally, make sure to put together a strong business plan that outlines how you will use the funding and how you will repay any loans. This will show potential investors that you are serious about your business and that you have a solid plan in place.
It’s Not Personal, It’s Business
Keep in mind that when lenders are looking at your personal credit history, they’re not always interested in your financial history as an individual. They’re more interested in your ability to repay a loan.
Bad credit can decrease your chances of getting funding for your startup, but it doesn’t make it impossible. First, try to find investors who specialize in high-risk investments. Another option is to bring on a co-founder or partner with good credit. Finally, make sure to put together a strong business plan that outlines how you will use the funding and how you will repay any loans.
By taking these steps, you can increase your chances of getting the funding you need to get your business off the ground. Contact us at Punch for a financial strategy catered to your business.