Starting a Small Home Business

The television commercials on credit scores are about 90 percent correct. It IS hard to get loans with bad credit. It IS almost impossible to get a credit card if your credit rating is low. And it CERTAINLY is harder to start a business that needs cash financing if you cannot get a line of credit from a bank.

But none of these things is impossible if you find alternative financing. That would include borrowing from friends and family, through a collateralized loan (equity mortgage on your home, or a car title loan, or offering something up at a pawnshop). But the single largest growth category of alternative financing is bad credit loans you get on your paycheck (also known as cash advance loans). These are the loans you take out against your next paycheck.

Let’s look at the pros and cons of each:

Friends and family loans – Great if they have money to spare, lousy if you fall behind on paying them back. It’s a famous friend killer.

Home equity loans – Managed responsibly, this is a great source of loans if you have equity in a home. The interest is tax deductible. But you risk losing your house.

Car title loans – If you live in a state where this is allowed, you can borrow thousands of dollars (depending on the value of your vehicle). But the size of the loan is its risk. Fall behind and you can lose your car or truck or motorcycle very easily.

Pawnshop loans – Similar to car and home loans, there is risk of loss. And the dollars you can borrow are usually only about ten percent of the value of the item.

Bad credit loans – A cash advance on a paycheck risks only an amount of money that is less than a single paycheck. And with a built-in payback method – pre-authorized automatic debit against the checking account where you receive your pay – the chances of doing that are slim.

So ignore what you see on television commercials about bad credit being the death of your financial life. You can get a cash advance in many ways and for good reasons, whichever method works best for you – and which you manage wise in the payback.