How to Go From Bad Credit To Entrepreneur In 4 Steps
Desiring to start a business can be a challenging feat if you don’t have the capital, to begin with. Some startup ideas can be costly, especially if you will need supplies to create your product, or manpower to run your services. However, this is all possible if you take the right steps–even if you’re in debt.
The main principle you have to remember is to manage your debt initially before working on your business. This gives you enough breathing room, preventing you from being buried in more debt even if your startup doesn’t take off. Below, you will discover some strategies that will help you succeed in getting out of debt while starting a business.
Pay off debt in a specific timeline
If you are wanting to start a business right away, it can be helpful to pay off or at least manage your debt. A poor credit score will hurt your chances of getting a decent business loan, so it can be helpful to manage your debt first through the following steps:
- Cut off credit card spending: If most of your debt is from unpaid credit card bills, it is best to stop the spending in that area. You should be spending on your existing budget only if you plan to get out of debt.
- Have a budget plan: Have a thrifty mindset as you begin to pay off your debt. Think of areas in your spending that you can cut down on, such as unnecessary subscriptions, dining out or expensive gadgets.
- Necessities first, debt second: It can be tempting to spend work bonuses and extra money on luxuries, but now is not the time for that. Have a laser-focused mind by putting your necessities first and allocating the second largest portion in debt payments.
Once you have set specifics on when you can pay your debt in full, you can start giving your attention to your entrepreneurial journey.
Find a loan that fits your needs
If you have a business in mind that requires quite a sum of capital, but your credit score isn’t on a good status yet, you can start with bad credit loans. Some companies are willing to lend people with a poor credit score. Just make sure to calculate your potential monthly payments when taking out such loans and see if it is workable for you.
Since bad credit loans are more available than ever, it is best to look through and find competitive interest rates that best fit your needs.
Another option is to seek loans from venture capitalists or angel investors. These individuals are willing to provide you with the capital in exchange for percentage equity in your business. The prerequisite of getting investors in your business is for them to see the present or future profitability of your offers.
Work on your business plan
Now that you have secured other debt issues and a good starting capital in place, you can now formulate a business plan that will help create profits over time. Creating a business plan involves the following major areas:
- Summary: A brief explanation of what your business is about, why it will be profitable in the marketplace, as well as mission and vision statements.
- Current market: To elaborate your potential profitability, you can explain your current market–what their needs are and how you are filling in the gap.
- Company structure: How will your business operate? What is the hierarchy from the administration down to the entry-level employees?
- Offers: What will be the products and services you are planning to offer during your launch?
- Sales and marketing: What are the channels where you are going to promote the business and how will you acquire sales?
- Projections: Based on your research, what are financial projections of your business in the next quarter, next year, or in 5 years?
These major sections will allow you to have a solid footing when creating long-term and short-term goals for your business. Additionally, this business plan will also be a great outline when presenting information to investors and key stakeholders.
Executing your plan
Once you have a plan in place you can start creating the long-term and short-term goals for your business. A business launch will require you to have your systems in place while having upfront marketing to draw in customers on your first day of opening.
For example, starting a physical store will require you to have an ample amount of inventory. Make it a goal to acquire a certain number of items before opening your shop. The same goes for food-related businesses. On your launch, it is essential to have the right amount of supplies to create the food products and make the business sustainable. Aside from inventory, other areas that you need to consider during execution are:
- In-service training for staff: Are all your staff properly trained in their roles and responsibilities?
- Damage control: If there are mishaps that occur, how will employees respond? How will you appease customers in such scenarios?
- Logistics and operations: How will services be conducted, products are transported, and how will the system work? Letting your staff master these steps are essential for your business launch.
After your first-day performance, you can evaluate areas of improvement and strengths, and readjust your plan according to these observations.
Entrepreneurship Despite Debt? It’s Possible
Bad credit shouldn’t hinder you from starting a venture that can change your life. With these steps in mind, you can successfully move from being in debt or having poor credit, towards becoming a successful business owner.