The last few years have been really difficult for us all financially and for some of us, we found ourselves stuck in some pretty awful financial situations. Many of us lost homes, our jobs and all of our assets and some of us fell into pretty extreme debt. When we are in a bad financial position, we do not want to stay in this bad financial situation and a good way to rebuild the money in your bank account is by making your own business. Creating your own business requires funding and many people think that it will be difficult to fund your business with poor financial history, but is that true?
If You Have Reached Bankruptcy, That Can Be an Issue
If you have really reached a low point with your financial situation, you may have had to file for bankruptcy due to extreme debts. Bankruptcy is always a big obstacle when it comes to trying to open a business and it will be the main thing that stands in the way of you being able to gain funding for your business. However, this can be improved or worsened depending on the type of bankruptcy you have. For example, if you have chapter 7 bankruptcy, this is easier to gain funding with as you do not have standing debt. It is important that you put some time into understanding chapter 7 bankruptcy as this will help you in the future when trying to secure funding for your business.
Venture Capitalists May Struggle to Work With You
When you are trying to open, your best friend is going to be a venture capitalist. Venture capitalists are really great for people that have previously struggled to gain financial backing, and they offer a lot of support to people that may need it. However, a venture capitalist not only invests in a business, but they also invest in the business owner and if you have a reputation of being bad with your finances, then a venture capitalist may be reluctant to invest their money in you, no matter how promising your business ideas may be.
You May Depend on The Help of Family and Friends
If you have a really poor financial situation, something that you may have to do is depend on the help of your friends and family to help fund the business that you are opening. Gaining money from your family and friends does not come with the same commitments as getting money from a bank. You don’t usually have to worry about aspects such as interest rates when you are borrowing money from families, but it does come with its own complications that you have to think of. For example, you may put tension on the relationships that you have with your family and so you may make it difficult to communicate with them.
People May Be Reluctant to Help You
If you are someone that has a history of not looking after your finances and you go out of your way to try and find someone to help you with your business finances, they may look at your previous reputation and choose not to invest in your business. Even if you speak to a friend or family for health, they still need to protect their own interests and they may be reluctant to invest in your business if you have a bad financial history, as they may not want to risk the relationship that they have with you for the sake of money.
Banks May Give High-Interest Loans
If you have a poor financial history, you may still have the opportunity to get a bank loan, but what you have to consider is the interest rates that they may instill. Bank interest rates can be ridiculously high on a good day, but if you introduce poor financial history into the mix, the interest rates can become even higher than you may imagine. The last thing that you want is to end up owing more money than what you have borrowed and so you should consider whether or not a bank loan is worth it. Meeting with a financial advisor will help you determine this.
