I will say the same things as everyone else on the blog - No Investor will invest and No Bank will loan to you with bad credit. In fact, even if you got angel money from a relative - you wouldn’t be able to get a lease in a shopping center, set up net 30 accounts with distributors, get more money if you run out (which will probably happen as most entrepreneurs underestimate expenses and overstate sales). Your venture starts and ends with your credit history.
Now with the bad out of the way - start working towards your goal. You could def try guerilla tactics to get your foot in the door via the web or perhaps a booth at the flea market or similar place in your area. However, what I would do is look at how I can feasibly make this happen in a reasonable time frame.
The credit problem: My first step would be to get a court order to remove any accounts that were your husband’s responsibility after the divorce. You can type it up yourself, take your divorce decree, and visit with the judge that handled your divorces secretary to take it by for a signature. It will be an uphill battle, but eventually you will get those removed. Next, I would dispute all of the negative information on your credit report that you have any valid reason for disputing. DO NOT HIRE A CREDIT REPAIR COMPANY - they will do nothing you can't do yourself and may harm you and will take your money. Then you need to pay off everything that you are responsible for. If you pay a collection - it still appears but has little effect on your score after 12 months. If you don’t have any open trade lines in your name - get some. You can buy credit from a credit card company that will give you a $300 card with $280 in fees on it. Pay it off and just pay the fees every month. You can also buy credit at a bank by purchasing a CD the borrowing against it - a two year note gets you the max bang for your buck. You need a total of 4 good trade lines minimum for at least 2 years.
The funding problem: The SBA would guarantee this loan if the bank backs it. In fact, now is a great time for the SBA because a 7a loan has a 90% guarantee and no fees. You do however need 20% down. If you don’t have the cash - look at home equity or 401k or whatever you can get. None of that works - save half the cash you need then approach a relative that has the other half or a company like mine. No skin in the game, no business. By approaching it this way, you have reduced your capital need from 85K to $8500. That is a number you can come up with in a reasonable time horizon. I don’t know what your financial situation is, but even if you are on welfare with 6 kids - you get a tax return that size... I would speculate that if you figure it will take you 2 - 2 1/2 years to fix and rebuild your credit, start saving now to reach your goal of $8500. Bankers will still see the collections, but if they are paid and you explain that you went through a divorce and paid them as soon as you could, they won’t decide your loan based on that. If you owe any money to the government, the SBA, student loans, HUD you need to pay those first. The SBA won’t back you if you owe money to the government. This path leads to business ownership in two-three years. If you haven’t already, in the meantime I would definitely get a job at a competitor to learn the business and see if it is something you really want to do.
If you are unable to pay your debt, your credit report will reset after 7 years from the date of first delinquency. Bide your time and save money for your dream.
Best of luck to you - If I can help further please feel free to email me.
www.buildingmainstreet.com
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