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 For better or worse, your credit score has become your "ACT score" when it comes to financing your own business. If you have a high score, you'll have a pretty easy time getting credit offers from a wide variety of funding sources. If your score is low or nonexistent, however, you won't. You will need some bright ideas. But a low score isn't something you can lose quickly, and even if you avoid it, it won't magically go away. The trick is to fund your business in ways that actually get your score back on track so when you're ready to expand your business, your score will start opening doors rather than getting them slammed in your face. Here are some ideas for entrepreneurs starting up their own businesses with low scores who are faced with funding challenges: Look beyond bank loans for financing. At Find A Credit Solution, there are many credit cards that offer rates lower than banks, and often little credit is required to obtain them. Also check out the following sites: www.accion.com www.prosper.com www.zopa.com www.count-me-in.org (for women business owners) www.americaonefunding.com For borrowers who don't have strong credit scores, the interest rates on loans from these sources will tend to be high. For a comparison, the average rate on business loans from relatives and friends is currently at 7.6 percent, according to CircleLending's Business Private Loan Index, whereas the rate was more than 12 percent at Accion and more than 20 percent at Prosper for individuals with poor credit. If you're accustomed to credit-card-level interest rates, these rates may seem affordable, but remember this: You can make partial payments on credit card debt whereas installment loan agreements may restrict you from making partial payments, and this can cost you dearly. There may be subsidized microlenders in your state that offer more flexible terms; since they're small, they may not have a website or web-based loan application form, however, and may be hard to find. Check www.microenterpriseworks.org to search for nonprofit organizations in your community that have programs for business owners with poor credit. Most states now have at least one microlender. For some business owners, flexibility of repayment is more important than getting a slightly lower rate, expecially if you don't expent to see profits for over a year. Don't overlook gifts and grants. If you need to avoid making debt payments, focus on getting "free" money in the form of government gifts and grants. Your search will be long and hard--despite what you read on the internet, there is no quick solution. Be wary of services that promise to locate government grant programs for you for a fee. Health-care businesses, technology companies, and retail businesses in low-income areas tend to qualify for grant money the best. Other forms of "free" money include gifts from relatives, free office space from former employers, and free services from friends or business associates. It may take time, but plenty of people with poor credit have started their own businesses, and you can too. Published: Tuesday 2nd of September 2008 09:07:23 PM For more information on credit cards and related topics, please see our library of articles. 
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