by Hugh Tyzack, founder and managing director of guarantorloansdirect.com
For many young entrepreneurs, coming up with a revolutionary or likely successful business idea is not the biggest problem they face in making that idea a reality. In business, the most difficult part of starting a new company is getting together the money needed to get an idea off of the ground. This is especially true for young businesspeople that may not have the needed cash reserves or credit to fund or obtain funding for their venture.
Luckily, there are a few ways to overcome this obstacle and successfully startup a business with no money and no credit when the traditional lenders have denied you:
Make Sure Your Expenses Are As Low As Possible.
Before even trying to resort to alternative sources of funds, it is important to ensure that your expenses have been reduced as far as possible. In lieu of obtaining a conventional small business loan, it may be difficult to source as much money as you had originally hoped. In addition, the funds that you do secure will potentially come at a higher interest rate than you had planned for.
By going through your business plan and reducing expenses, you can drastically increase your chances of successfully funding your venture. Consider whether starting off smaller than planned is a better choice than not starting off at all.
A few things to look at lowering are:
- Monthly overhead such as rent and employee wages
- Initial inventory costs
- Upfront capital expenditures (consider purchasing used equipment and other startup resources)
List Any Potential Sources Of Money.
Young entrepreneurs looking to start a new company may be surprised to find out that there are a number of often untapped resources out there for raising funds. By looking outside of small business loans offered by conventional lenders, you have the opportunity to find money from a myriad of different sources.
Some options to consider are:
- Friends and family
- Former co-workers and colleagues
- Equity loans on your vehicle or home
- Peer-to-peer lending networks
- Business suppliers and partners
Once you have listed every potential option you have for obtaining money, it’s time to pound the pavement and start asking. Starting a company isn’t easy, and working through your contact list to secure capital is a process than many successful business owners have had to go through in the past.
Internet-Based Lenders Provide Worldwide Funding.
Over the past decade, thanks in part to the worldwide economic downtown and recession, the prevalence of internet based lenders have grown significantly. These lenders can be based anywhere in the world – including the United States, the United Kingdom and Australia – and provide borrowers with the money they need. Oftentimes, this comes with no background or credit check. These sources are ideal for people who need money quickly, have been turned down by other traditional sources and are confident that they are able to generate a healthy return on their funds.
While these lenders can loan you up to $25,000 for as long as twelve months to allow you to get your business running, they do have their downside. Internet based lenders normally charge an interest rate that is higher than you would find through local lenders and large, commercial banks. This means that they are not a good long-term financial solution for your business, but can give you the cash you need to get started until you have enough operational history to obtain more conventional funding.
Starting a new company with no money and less-than-perfect credit is an all too common problem for many young entrepreneurs. It does not have to be the end of your dream though. There are many sources out there which can help you get the money you need to fund your business, although you may end up paying slightly more to offset the added risk to the lender. After examining all of your options, the best thing that you can do is to compare all viable sources of funds and find the one that is the best fit for your new business plan.
Hugh Tyzack founded guarantorloansdirect.com, and serves as its managing director. His company works to provide loans to applicants with poor credit. Keep track of Hugh on Twitter @badcreditloans8 and also on Google+.