By the end of 2016, nearly 8% of job seekers in the United States started their own businesses.
Whether you’ve always had entrepreneurial visions or you have a million-dollar idea that you’re ready to get launched, starting a business can be terrifying, exciting, and chaotic all at the same time.
For most, the finances represent a big piece of the puzzle. Learning how to get a loan with no credit can be the first step towards achieving your financial dreams.
Let’s get into what you need to know!
Friends & Family
While this isn’t a ‘formal’ method for funding your business, many people lean on the shoulders of their loved ones while getting started.
If you do decide to go this route, you need to draw up specific boundaries and expectations. For example, is this going to be a loan? If so, will there be interest? What will the repayment schedule look like?
Is it a gift? If so, does your family have any of their requirements for how the money needs to be used or delegated?
When in doubt, consider writing down the guidelines and putting them on paper. You don’t want to create bad blood with the people you love the most.
Small Business Grants
Unlike traditional loans, grants refer to money you don’t have to pay back! With that said, they can be much more challenging to receive than loans.
Most small business grants specialize in certain niches, like scientific research and development. However, they are often available at local, state, and federal levels.
Grants typically come with a set of predesignated requirements and expectations, so you will need to make sure that you qualify for those items.
Crowdfunding
Over the past several years, many entrepreneurs have turned to crowdfunding sources to launch their new services or products.
The premise is both simple and powerful. Crowdfunding allows you to harness the collective efforts of your friends, families, and potential investors and customers to raise the desired capital you need to fund your business.
To date, popular options include GoFundMe, Kickstarter, and Indiegogo. With these, you can host dynamic online campaigns, share them through social media and email, and obtain feedback.
With equity-based crowdfunding, you can allow investors to own a portion of your company by exchanging capital for future equity shares.
No-Check Online Personal Loans
If you’re asking, how are online loans no credit check even possible, then it’s time to get enlightened.
Today, many lenders will provide online loans based on your ability to repay- rather than on your credit score.
To qualify, you will need to be a legal adult, have an active bank account in good standing, and be able to demonstrate proof of consistent and regular income. The size of your loan will be proportional to your ability to repay it back.
These loans are often very accessible, straightforward, and have excellent flexibility. They can also help your credit score if you make all your payments consistently on time.
Microloans
If you are a minority small business owner or have a unique or disadvantaged background, you might be able to qualify for a microloan.
Microloans refer to small, short-term loans with low-interest rates. They are usually reserved for self-employed entrepreneurs, new startups with low capital requirements and overhead, and small businesses with a few employees. Some lending institutions give extra priority to low-income and minority populations.
Microloans vary anywhere between $500 to $50,000 in financing. They do require a rock-solid business plan and the capacity to offer collateral.
Self-Financing
Self-financing your startup is one of the fastest and easiest ways to get quick money. There are a few ways you can tap into your cash reserves.
Personal Savings
Whether the money is coming from your savings account, a family windfall, or a money market account, many people do dip into their own savings to invest in their business. This eliminates the need for additional interest.
Just make sure that you do have enough emergency money on hand. You don’t want to strap yourself so thin that you risk putting you or your family’s physical or emotional well-being in jeopardy.
Sell Personal Assets
Whether you own stocks, bonds, real estate, or old electronics just lying around, consider what you can sell to generate some extra cash for your business.
Just make sure that you understand the tax implications associated with selling certain assets. If you don’t, you’ll get an unexpected capital gains tax surprise from Uncle Sam.
Borrowing Against Your Home
If you own your home, you can borrow against the property’s equity with a home equity line of credit (HELOC). These are popular ways to access your home’s value.
With that said, lenders do scrutinize the restrictions in using this method. Most of them require borrowers to retain at least a 20% ownership stake in their home.
Using Retirement Money
This should be a last-resort method because you will pay significant penalty fees (up to 10% depending on the account) to access your cash prematurely.
With that said, if you are desperate to get started, you can always take out money from your Roth IRA or 401(k).
Final Thoughts on How to Get a Loan With No Credit
Starting a business can be daunting and exciting at the same time. Knowing how to get a loan with no credit (or bad credit) can help make the process much easier.
Are you interested in learning more about dominating business and entrepreneurship? Be sure to check out our blog!
