Q: How can a person with bad credit build relationships with suppliers, lenders and contractors?

A: First, let me assure you you're not alone. Tens of thousands of Americans have damaged credit ratings. Many people become buried in debt through a spendthrift lifestyle, miscalculated risks, divorce, emergencies, unemployment or prolonged periods of illness and find themselves in financial distress. One or two late payments turns into several missed ones. After the threatening creditor phone calls and letters, repossessions, judgments and garnishments follow. All this negative information becomes black marks on a person's credit report.

Whatever the reason you suffer from bad credit, your credit history can be rehabilitated. It won't be easy. You'll need to be persistent, creative and persuasive in getting others to take a chance on you. Here are a few ideas on how to work through your situation.

  • Face up to your debt. Most creditors use credit report information to determine your creditworthiness. A potential creditor may be more responsive to a person who is working to pay off debts. So deal with your impending debt head on. Get a copy of your credit report from one of the three major reporting bureaus: Experian, Trans Unionand Equifax. Contact your creditors and work out a repayment plan or renegotiate terms. Request that each creditor remove its negative entry from your report upon settlement of the debt. Get all debt agreements in writing.

Or contact the Consumer Credit Counseling Service (CCCS) in your area. This nonprofit group can help you negotiate with your creditors for better terms. They also provide money management workshops and Internet counseling. The National Foundation for Consumer Creditprovides referrals to local CCCS offices. You may also glean more pointers from the About.com Credit/Debt Management Web site.

  • Try finding grace with smaller vendors. First establish cash-and-carry relationships with small, local suppliers. Once you've become a regular, inquire about its credit policy. The supplier may now be willing to work with you on a limited basis to start. For example, you could pay 50 percent on an order with the balance due in 30 days. Build up your credit relationship over several months and then begin to use this supplier as a reference to get other credit.
  • Seek out character-based loans. Most business loans require that you have good personal and business credit. However, you may still be eligible for a micro-lending program. Private and SBA-backed agencies make loans of a few hundred dollars to $25,000 to qualified individuals. The loans can be used for start-up, expansion, working capital, equipment or supplies. The borrowing criteria is based on the lender's belief in your integrity and the soundness of your business idea. For more information on microloans, visit the SBA's Web site at http://www.sba.gov/financing/frmicro.html.
  • Consider contractor alternatives. You could join a bartering exchange of organized professionals who trade or exchange products and services in lieu of cash. You'll then have access to a ready network of offerings, from office supplies to printing to legal counsel, and may be able to woo service contractors over with purchase orders and work contracts. A cosmetics designer I know persuaded a manufacturer to produce $80,000 worth of goods and wait six months for payment all based on a signed purchase order from a major department store.

Lastly, grow your business on cash flow while managing moderate debt. It may take you longer to build, but your business may last longer, too.

Kimberly Stansell is an author, entrepreneur and businesswoman in Los Angeles. She has a knack for turning her desires into reality with little or no money and helps others do the same in her book Bootstrapper's Success Secrets: 151 Tactics for Building Your Business on a Shoestring Budget (Career Press). For more business-building tips and resources, visit her Web site, www.kimberlystansell.com.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.