Friends and family can sometimes help entrepreneurs by loaning them money. But for many, especially those who already have bad credit, this is a long shot. Personal credit cards are a popular source of funds for people looking to start their own business, and many credit card companies will approve customers with bad credit. But this is a potentially dangerous way to get money. If you're unable to pay back the loan, you may be in deeper debt yet. The same applies to personal loans secured at high interest rates.
3 other sources that are better, safer, and smarter
- Grants: Grants represent money that does not have to repaid. Grants often come from private foundations, corporations, charitable organizations, even local, state and federal governments. But be prepared for hard work finding one that fits your needs. More and more grants are being made available to veterans, so if you served in the armed forces, this is a good place to start looking.
- Microloans: Microloans are often provided by nonprofit lenders and institutions that specialize in lending to minorities, especially if they are starting businesses in struggling communities. Also, these sources offer better terms and the amounts are smaller and easier to manage and repay.
- SBA: The U.S. Small Business Administration (SBA) also has a microloan lending program. These loans can range anywhere from $10,000 to $50,000.
If you are an entrepreneur with bad credit, check out funding sources by visiting www.nerdwallet.com/blog/small-business/start-up-business-loans-for-bad-credit/