Small business financing isn't a fun subject for most people. Bad credit and outstanding debt can make the subject even more daunting. There are some options available, though, and taking the right steps can facilitate the financing process.
Create a Solid Business Plan
A good first step is to create a business plan that is complete and solid, outlining your financial situation, your growth plan and your goals. Most financial institutions require this when applying for a small business loan, but with bad credit it's particularly important.
A business plan will show you are serious about your business and that you have thought about a growth process. Even if you go to a private source for a loan, they will more than likely want to see some kind of plan.
Financial Institution - Traditional Loan
This is the most common type of loan, but with poor or no credit, the possibility of acquiring a loan through this means is unlikely. Even arming yourself with a solid business plan may not do the trick. It may be possible to apply for a separate business loan, rather than a personal loan, but it depends upon how your business is structured.
There are literally thousands of loan specialist businesses in existence. This is a place where you have to take great caution before signing or agreeing to anything. Most of these types of lenders will make a loan agreement with you despite any bad credit, however, the interest rate and the terms of the agreement may make you cringe.
Use a Co-Signer
In some cases, you may be able to secure a loan at a lower interest rate, even with bad credit, if you have a co-signer with good credit. Basically, this assures the lender that someone will be making the payments, despite any financial situation.
If you are just starting your home business and have a good solid plan in place, one loan that might work for you is a collateral loan. This type of loan may offer a varied interest rate, but you will have to put something up as collateral in case you can no longer make the payments on the loan.
If you own your home, that will work as collateral. Make sure the terms of the loan are clear and agreeable before signing anything.
Family or Friends
Another financing option for your small business (if you aren't able to secure a loan elsewhere) is to enlist family and friends to invest in your business in the form of a loan. Offer to pay interest as a form of goodwill and be disciplined about paying back the loan.
Another financing option for your small home-based business is to find investors and have them invest a certain percentage in order to secure monies. As your business situation improves, you can offer to buy them out of their investment.
Remember, it takes about 24 months of running a business before you are seen as a credible risk to most financial institutions. No matter which route you decide to take, if it doesn't work out don't give up on your dream.