When trying to start a small business the first order thing is getting a small business loan to get your yourself up off the ground. Getting a loan is not very hard if you have good credit because of how many different options you have. For example, you can get a second mortgage to use for your start up capital.
If you are like many Americans out there and have less than perfect credit your options are not as wide, second mortgage loans for people with bad credit are very hard to find and even harder to qualify for. Bad credit small business loans are also hard to find and qualify for. In fact, most banks will not lend you money to start up a business if you have a personal credit score that is less than 640. The good thing is that you can still get the money you need to start your company, you just can’t use banks.
What you need to do when trying to get a loan with bad credit is to build up your businesses credit. You can begin doing this by separating your company credit from your personal credit, open up accounts in your businesses name and make sure you pay all of the bills on time. To open these accounts you will need to obtain a TX ID number from the IRS, but you will also need to make your business a separate legal entity, which will be a LLC or a corporation.
Once your company is a legal entity it will no longer be linked to your personally, meaning you do not need to use your Social Security Number to open up any credit accounts for your business, but at this point you still cannot get a small business loan. To get the small business loan you need to open up vendor and supplier lines of credit and then ensure that those invoices are paid on time. Once you have built up your credit with these types of accounts you can approach banks about getting a larger loan.
