It’s hard to start your own business if you can’t get approved for a small business loan! Borrowing money from a bank or other financial institution requires an application process and approval by the lender, which means that your credit history will play a role in whether or not you qualify. So what do you do if you have some negative marks on your credit report, like past-due bills, overuse of credit cards, or late mortgage payments? Here are three simple steps to clean up your debt and fix your credit before applying for your small business loan.
Step 1: Create a Budget
Set up a spreadsheet with one row for each of your expenses. Track your spending on it every day (or as often as you want) by updating the amount in the column next to the item you spent money on. Once you’ve tracked how much you spend, get out your bills and create two more columns. The first column should say Available Income – this is money that is not going towards any other expense, like your cell phone bill or insurance. The second column should say Loan Amount – list out what amount you would need in order to cover all of your expenses.
Step 2: Negotiate with Creditors
If you cannot afford to make the minimum payments on your credit cards, it is best not to take out any new ones until you have the ability to repay your existing debt. First, get a realistic idea of what you owe by tracking how much money you are paying in monthly installments. Second, set up meetings with all of your creditors if possible. Third, find out what they will be willing to do in order to help you clean up your debts so that you can make some more manageable payments going forward.
Step 3: Get Help from Expert Sources
The next step is to take care of your credit. Paying off any delinquent or bad debts will get rid of the negative marks on your report, which is important if you plan on applying for a small business loan. You’ll want to first set up an appointment with an experienced bankruptcy attorney in your area who can advise you about which type of bankruptcy is best for you based on how many assets and debts you have, as well as how much income you make. The process may cost several thousand dollars (unless Chapter 7 is an option) but will immediately start wiping out some of those bad debt charges from lenders that are dragging down your credit score.
Step 4: Do bank loans help?
Not all financial debt problems are created equal. If you’re in debt, there’s likely more than one way to get help. And before seeking that help, there are a few things you can do on your own. Consider the following steps if you want to take charge of your finances without bankruptcy or loan modification:
– Track your income vs expenses. It sounds pretty basic, but it’s critical when evaluating whether or not you’re financially able – or can afford – to pay off any outstanding debts (or credit cards). You might be surprised by what doing this reveals.
Where do I go for financial debt assistance?
1. If you have student loans, the first step is to review all of your loan offers and choose the best one based on the loan type, interest rate, lowest fees, etc. This will help narrow down your selection of offers. The Department of Education (DOE) also has information about how to get help with student loans if you need it.
2. Pay off high-interest credit cards or any other high-interest debts before applying for business financing so that they’re less likely to charge you excessive fees while paying off the debt over time.
Once that debt is low…
Now that your debt is low, you can start looking for ways to fund your new business. Decide on the type of small business you want: If you’re not sure what type of small business to start there are plenty of resources out there to help. Next, you will need to figure out where the funding will come from for your start-up. The easiest way to do this is with personal savings and/or retirement funds (though many people don’t have these). You could also ask family and friends for investments in exchange for shares in the company. Another option would be to go through an accelerator program like Techstars or Y Combinator which offers equity-free grants in exchange for 5% – 10% of your company’s future earnings.
Now that you have a few basics to clear up and fix your credit, get started on your journey to opening up your very own business!
Partner with United Funding Group
In these uncertain times, it’s more important than ever to have a reliable partner you can count on for funding, especially with a Startup business. United Funding Group has a long history of helping small businesses weather tough times. We offer a variety of funding options that can be tailored to your specific needs. So if you’re worried about how inflation will impact your business, give us a call. We’re here to help.
Contact UFG, Today!
United Funding Group provides funding for all types of businesses, regardless of industry. We provide merchant cash advances for many industries, including retail, service, restaurant, and real estate investment. Whether expanding your business or opening a new one, we can get you funded quickly and easily. Contact us today to learn more about merchant cash advances from United Funding Group, ufgfunding.com.