Will Credit Card Debt Prevent Opening Your Small Business?

If you are an entrepreneur with poor credit history due to credit card debt, then you are probably assuming it's going to prevent you from opening a small business.

Luckily there are plenty of other financial avenues to take when it comes to finding the startup funds for your future business.

Here are just a handful of tips for starting your small business regardless of your debt history:

Seek Out Nonbank Lenders

Although the bank may consider your credit card debt a sign of a risky investment, there are other lenders out there willing to overlook your credit history.

Micro lenders and nonbank lenders don't follow the same lending practices as banks, so they have more options in terms of funding for entrepreneurs.

There are a number of web-based micro lenders to choose from, so it's wise to research and find the lender that's right for you.

In addition, the U.S. Small Business Administration (SBA) offers small business loans through a variety of lenders, which is just one of the great micro lending options available.

Find Other Forms of Financing

If you are uncomfortable with getting a small business loan through a micro lender or you can't find the right lender for you, the bank is still an option.

As mentioned before, banks typically won't give you a loan if they consider you a risk due to your credit history, but there are other options.

For example, if you are a homeowner, then ask your bank for a home equity line of credit. Just remember, although a home equity line of credit is a safer lending option for the bank, it's also a riskier form of credit for you, especially before your small business has an opportunity to get off its feet.

Keep Your Budget in Mind

Credit card debt is oftentimes crippling, but it's also something that's reversible.

In other words, there are monthly budget tips for avoiding credit card debt that'll help you repair your credit history and look more desirable in the eyes of lenders:

• Create a Budget - You can't budget wisely without creating a budget first. Start by cutting any expenditure out of your work and personal finances that aren't considered necessities, then put those funds toward your credit card balance. It easier than you might think.

• Tackle the Larger Debt First - If you have multiple credit cards, pay down the one with the larger balance as it is negatively affecting your credit the most.

• Pay More Than the Minimum - Although paying the minimum balance is better than nothing, paying in full or close to full each month will keep the accrued interest low and get you that much closer to paying off your debt.

• Stop Using Your Credit Cards Altogether - The best way to stop your credit card debt from increasing is to simply stop using your credit cards.

Ask Friends and Family

If you can't get a small business loan through a micro lender or a bank and you've exhausted all other avenues, you can always turn to friends and family for loans.

So, put your entrepreneurial spirit to work and get those close to you involved in your small business venture. Just make sure you have a solid business plan that provides the possibility for future repayment.

As you can see, just because you have credit card debt doesn't mean you can't start the small business of your dreams.