Do you need a loan to start a business but you have no collateral/guarantor? If YES, here are 20 easy steps to start a small business with bad personal credit.

One of the worst things that can ever happen to you is to delve into business without having the required start up fund to sustain yourself in your industry. In the business world, when you are tagged as someone with a bad credit history, you can hardly get banks or any loan issuing organization to give you a loan.

As a matter of fact, you would find it very challenging to get business partnership and credits if you have bad credit history. Bad credit is a tag that most organizations and business people don’t want to be identified with.

What is Bad Credit History?

Bad credit history simply means having very low credit score and such persons usually find it difficult to access credit, and if they eventually get an organization to give them credit, they are usually charged higher interest rates when compared to people with good credit history. A person’s credit history is a record of his credit from a number of sources including banks, credit card companies, collection agencies and government agencies.

So, if you want to start a business and you have a bad credit history, then you must consciously make some amendments. Here are 20 practical steps to take before starting a business especially when you already have a bad credit history.

20 Steps to Start a Small Business With Bad Personal Credit and Succeed

  1. Take a Course or Lesson on Financial Management and Budgeting

The first step you need to take before starting a business especially when you already have bad credit is to take a course or lesson on financial management and budgeting. The truth is that one of the major reasons why you fall into bad credit rating is because you lack financial management and budgeting skills.

If you have good financial management and budgeting skills, you will sure work your way out of bad credit ratings and of course build a successful business from the scratch and maybe without external financial assistance.

  1. Always Work with a Budget

One of the chief reasons why people fall into bad credit is their inability to work with a budget. The truth is that if you strictly follow your budget when carrying out expenses, you can hardly fall into bad credit and when you have good credit ratings, it is easier for you to access loans to start a business or re-invest into your business for the purpose of expansion. Besides, if you are able to work with a budget, you are sure going to successfully build a business.

  1. Minimize the Debt/Credit You Collect

One bad thing about bad debtors is that they always find it easy to fall deep into debt. This trap is very difficult to come out of. It is bad in itself that you have bad credit history, so all you need to do is work hard to turn around your bad credit history.

Part of what you need to do when you fall into this category is to work hard to minimize the debt or credit you collect. If you can be successful in this regard, you are one step away from turning your bad credit ratings around and when you successfully turn your bad credit ratings around, it is easier for you to build a successful business.

4. Learn to Always Pay Your Bills on Time

If you take your time to study people with bad credit history, you will find that one common denominator with them is that they hardly pay their bills on time. As such, if you don’t want to fall into bad credit ratings, then you must be discipline enough to always pay your bills as at when due. If you must defer the payment of any of your bills, let it be for a genuine reason and try as much as possible not to allow it repeat itself.

5. Hire a Financial Coach

No human is a custodian of knowledge and one of the reasons why people fall into bad credit is because of their lack of knowledge on how to handle finance. If you know you are already in bad credit, then on of the steps you need to take before starting a business is to hire a financial coach.

A financial coach will guide you from bad credit ratings to good credit ratings especially if they are well – experienced and if you are willing to follow their counsel and leading. The truth is that when you work with a financial coach, you stand to learn a lot and it will help you when you start a business of your own.

  1. Leverage on Payment Reminders

Another step that you need to take before starting a business especially when you have a bad credit history is to leverage on payment reminders. As simple as it sounds, it can actually prevent you from falling into bad credit rating.

7. Maintain Low Public Life Profile

One of the culprits why people fall into bad credit ratings is simply because they want to please everybody therefore living life above their means. The truth is that no matter how hard you try to impress people by living above your means, you can never impress everybody. So, a good step to take before starting a business especially when you have a bad credit history is to maintain a low public life profile and never live above your means.

If you take your time to study the lifestyle of successful entrepreneurs like Bill Gates, Mark Zuckerberg and co, you will realize that they don’t live their lives to please or impress anyone; they are known to always maintain a low public life profile despite the fact that they are world celebrities. Maintaining a low public profile will help you build your business faster than you think.

  1. Never Get Involved in Impulsive Buying

If you are always buying everything you like or come across, you will fall into bad credit and if you already have a bad credit history, you can never come out of it if you continue to buy every and anything that you feel you need. In order words, a good step that you need to take before starting a business especially when you have bad credit history is never to get involved in impulsive buying.

  1. Learn to Always Save

If you have ever heard the aphorism that says ‘savers are earners’, then you will agree that it pays a lot to save. A man that has good savings culture can hardly fall into bad credit ratings. In essence, one of the steps that you need to take before starting a business- especially when you have bad credit history is to cultivate good savings culture. You are not expected to save only when it is convenient for you.

  1. Understudy a Businessman or Businesswoman with Good Credit History

The type of knowledge that can be garnered when you closely understudy a person cannot be compared to that which you read about. This is one of the reasons why it pays to give time to understudying one who is in the line of business you aspire to go into. There are several people out there who are the ideal picture of the kind of person we want to become.

So, if you have a bad credit history, one of the steps you need to take before starting a business is to understudy a businessman or businesswoman with good credit history. You can choose to study them from afar or from a close range via a mentorship or intern platform. The bottom line is that you will gain business and financial management insights that will help you build your business to success while maintaining good credit history.

  1. Start a Small Business (Experiment with a Mom and Pop Business)

Another step that you need to take before starting a business especially when you have bad credit history is to start a small business. Experiment with a mom and pop business; a business that does not require you to source for business loan.

The bitter truth is that if you have bad credit history, you can hardly get any bank or loan issuing organization to give your business a loan and if you get a bank to give you loan, you will be expected to pay high interest rate. But if you can successfully build a small business and keep a good financial record, you can be lucky to get support or low interest loans from banks.

  1. Start a Business from Your Savings

If you have bad credit rating, you will find it difficult to access business loans with good interest rates. So, a good step to take before starting a business when you have bad credit history is to start a business from your savings. If you can successfully start and build a business from your savings, it won’t be too long before you turn around your negative credit history and be able to access business loans from banks and other lenders to build your business. It is a good step to take and a way to show the world that you want to truly turn your bad credit ratings around.

  1. Partner with a Person with Good Credit History When Sourcing for a Business Partner

Another step that you can take before starting a business especially when you have a bad credit history is to partner with a person with good credit history when sourcing for a business partner. It might sound like a shortcut, but is indeed a good way to re – invent your business and financial life.

Just ensure that you allow your business partner to know about your bad credit history and let them know that you are partnering with them so that you can learn how to keep good credit history as a businessman or businesswoman.

14. Build Your Business by Re- Investing Your Profits

Building and expanding your business while re-investing your profits is a good pointer to the fact that you want to turn your bad credit history around for good. As a matter of fact, it is a good way to start especially when you are struggling with bad credit history. The bottom line is that you must work hard to earn your startup capital from a petty business. It will go a long way to show that you are determined to come out of bad credit and of course build a successful business.

  1. Track Your Daily Spending (Keep Record of Your Daily Expenses)

Accountability is one of the things that every aspiring business person ought to hold dearly. If you take your time to track your daily spending, you will be amazed at how much you spend daily and how much such money can multiply for you if you can successfully save them and invest them in a business venture.

  1. Be Discipline

Being disciplined is one of the best things that could possibly happen to a focused entrepreneur. In fact, most people fall into bad credit because they are not disciplined with their finance. The truth is that you can hardly find a successful businessman or businesswoman with good credit history that is not disciplined.

17. Be Quick to Seek Help

Your ability to source for help when you need one is the key to staying afloat not only in business, but in life generally. One good step you need to take when you want to start a business especially when you have bad credit history is to be quick to seek help when you need one.

Some people fall into bad credit ratings simply because they think they can handle business and life challenges all alone by themselves. If you seek and get help when your challenge is just surfacing, you will succeed in taming the challenge before it grows into a monster.

  1. Read Relevant Books

You can never estimate the solutions that are buried in a good book. A good way to start if you want to start a business when you have a bad credit history is to look for good books that address your situation. There are good books out there that can guide you on how to turn your bad credit history around within record time and in some cases such books are available for free as e – books on the internet.

  1. Learn the Art of Goal Setting

One good step you need to take before starting a business especially when you have bad credit history is to learn the art of goal setting. If you are good with setting goals and achieving goals, you can hardly fall into bad credit ratings.

So before starting a business when you have bad credit ratings, first start with setting smaller goals and work hard to achieve those goals. It will sure put you in a good state of mind (positive mental attitude) to build a business no matter the negative status of your credit history. Just ensure that you set smart goals; goals that are achievable.

  1. Work as an Intern

If you have bad credit history, you can hardly access business loan and even if you come by a bank or lender who wants to give your business loan, you will get it at a very high interest rate. In essence, you must source for startup capital from somewhere else and one of the means of generating startup capital is to work as an intern.

If you are lucky to find a job as an intern in a business that is similar to the business you want to start, you will be getting double benefits. You will get the money you need to launch your business and you will get the required business experience needed to build your business. So, one of the steps you need to take before starting a business especially when you have bad credit history is to work as an intern to raise money and get the relevant business experience.

At this juncture, you should know that hope is not completely bleak for people with bad credit scores. It is also important to categorically state that the fact that you have bad credit history does not in any way stop you from starting a business and becoming a successful businessman or businesswomen with good credit history; as there are few smart ways you can raise funds for your business even with a bad credit score and no guarantor.