If you need help funding your business, turning to a lender might be your first choice. But many lenders connect the company’s trustworthiness with the credit of its owner. So, if you already have debt or don’t have a solid credit history already, you may not be able to get the funds you need. Luckily, there are a few strategies to try before you consider giving up your dream of being a business owner.
Try to Pay Off Your Existing Debt
It’s best to try to reduce your current debt as much as you can. That might mean putting off your dream for a time while you get your financial life in order. Consider living more frugally so you can save as much as possible. If you have debt from your education, consider refinancing your existing student loans with a private lender to save money on monthly expenses. That way, you will be able to set aside as much as possible. At the same time, you might get a lower interest rate, so you may be able to pay it off faster.
Bootstrap Over Time
If you have plenty of debt, your company might not get the best terms with a loan. You might get a higher interest rate with a lesser amount of capital. But if you don’t mind building your organization slowly, you’ll have time to show financial responsibility, building the company’s credit. You may then be able to access more funding in the future. Look for ways for your business to save money, such as decreasing your overhead costs. Then you can make the smaller initial loan work for you so you can work toward getting a longer loan with better terms.
Look for an Investor
Even if you have the best business model, some organizations might have a high startup cost. That means bootstrapping might not be the best option. If you can’t get a loan, you might want to look for an equity investor. They may be more likely to have the needed resources for funding your company. Still, it can be hard to find a partner or investor who is willing to take the risk, especially if your industry is already competitive. And if you find someone to make a significant investment in your company, they might want to have some ownership in it. But it is a better option than nothing, so you may want to consider it.
Crowdfunding is an Option
It is possible to start a business even if you’re in debt, and one way of doing that is to look to a broad range of potential investors. They don’t have to be your close family members or be formal investors. Your target audience might be interested in helping get your company off the ground. That’s especially true if your chosen niche already has a community around it. You could create an account on a kickstarting platform and let people know about your new organization. Small donations can add up until you have enough to get started.
