How to Start your Business with Bad Credit?

Many people dream about running their own business these days; they want to earn money while doing something they’re passionate about. Do you also have a passion that you would like to share with the world or you simply want to be your own boss, but you don’t have enough money to get the business going? Are you looking for a loan, but you worry you won’t get it because of your financial history? Fortunately, apart from regular banks, there are direct lenders and online installment loans with instant approval, like Realistic Loans, who are there to help you if you are declined by your bank because of your bad credit.

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What does it mean to have bad credit?

In general, your credit score shows how you dealt with your previous loans. If you had problems with paying them off, your credit score is low and lending you anything is risky for a lender, that’s why most banks won’t do it. But your loan history is not the only thing that impacts your loan eligibility. Here are the factors that influence it and how important each of them is: your bill payment history (35% of the score), any current debts (30%), age of your credit account (15%), types of credits on your report (10%) and number of credit inquiries (10%). 

How does bad credit loans work?

Basically, if you’re a risky borrower, a lender needs to somehow secure their future. Because of that, you will probably get a loan, but with a higher interest rate than someone with good credit. That’s how the creditor makes sure to stay in business, even if some of their borrowers don’t pay off their loans.

Bad credit loans can be either secure or not. If it’s secure, you have to present an item of value that will be claimed by a lender if you don’t pay off your loan, e.g. your house or car. In the case of an unsecured loan, you simply sign documents as a promise of giving the money back. If you don’t do it, the creditor can use debt collection measures.

You have the money… what’s next?

Starting your own business is always a little bit risky and puts the pressure on you, but the pressure is even bigger when you’re starting everything with borrowed money that you know you will have to pay back, no matter the outcome. That’s why you have to think everything through very carefully. The first and most important thing is to find a profitable idea for your business. First of all, think about something that you’re good at, that maybe you could teach or share with people and consider if there’s a way to make money from it. If you’re not sure how to approach this, here are some ideas for business that are likely to be successful:

  • Bookkeeping – if you’re good with numbers, you’ll always find other companies and individuals who will gladly give their books to you to manage them. The advantage of bookkeeping is that you don’t need any special equipment to do it, so it’s less expensive to start it up. And the standard rate of a bookkeeper is also not bad. 
  • Gardening – taking care of a garden is very time-consuming, so there will always be a demand for good gardeners. If you’re great with plants, you like physical activity and have an eye for landscaping – this may be something for you. 
  • Catering services – do you feel good in the kitchen and your friends tell you you’re a great cook? Do it for a living. Catering services are desirable in today’s world where everyone is busy and always in a hurry. All you need is some equipment – you can even operate from home.
  • Cleaning services – a lot of people don’t have time to clean their houses these days, there are also many companies that need to find someone to keep their offices nice and tidy. You only have to get some cleaning products, a vacuum cleaner, and a car to get you to your clients. 
  • Tutoring – you can teach at your students’ homes, online or open a little school. It doesn’t matter what skills you’ve got, as long as you can share your knowledge – you can teach languages, math, literature or how to play instruments. You only need something that others would like to learn.
  • Technology repair services – do you have an eye for technology? Do you know how different devices work? Great, because many people don’t. You can use these skills and help those who can’t deal with their technical problems by themselves. It can be a very lucrative business because there are many people who will gladly pay more to have something done thoroughly, but quickly.

Of course, this is all just a beginning. You can have the best idea for your business and money for starting it, but without a well-thought marketing strategy and budget planning, you won’t be able to make any profit and keep going. So be bold and don’t hold yourself back, but stay cautious and reasonable as well.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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