Starting a successful business takes more than just an excellent idea. When it comes to securing the funding you need to put your business plans into action, there are a few things that a lender will look for – one of the biggest telltale signs that you’re a reliable borrower is a good credit score.
Despite this fact, having a less than ideal credit history isn’t uncommon. So, how can you get your business started if you’ve got a lower than average credit score? Here are a few things to consider.
Securing funding
Having an above-average score is key to being accepted for any type of credit, whether you’re applying for personal or business use. And while it’s hard enough to go about your personal financial affairs with a poor credit score, starting a business with one can be even trickier.
When you seek a business loan, you’re likely to be looking to borrow a lot more money than you would with a small personal loan. While you don’t want to be too ambitious, you do want to put yourself in good stead to get your business off the ground successfully – so figuring out how much you need and how you’re going to pitch to lenders is key.
While it’ll be hard, business loans for people with bad credit do exist. You’re likely to have fewer lenders to choose from, and the amount that you can get may be limited – but every little helps, and as you take the steps to improve your credit score, you’re likely to find that your funding options improve.
Business versus personal credit
Some business owners make the mistake of relying on personal credit to launch their business. This is a huge risk, as if such a company were to face financial hardship, it would reflect on the individual and the business combined. Keeping your personal finances separate from any business endeavours means that you have two separate credit scores you can rely on – while they’ll always be somewhat interlinked, it does allow lenders a bit more clarity around how you conduct your finances as an individual versus a business.
Have a low personal score, but a high business one? While any potential lender will take your below-average personal score into consideration, showing that you’re using credit responsibly in your existing business will improve your chances of securing a loan.
How can you improve your credit options?
If you do find yourself stuck or feel that the financial options available to you don’t meet the needs of your business, it’s always best to put a little extra work into improving your credit file, rather than submitting endless applications that’ll continue to knock your score. You may want to look into credit-builder options, or work on paying off any existing debts. While you’re likely eager to get your business up and running as soon as possible, it’s important to note that it’ll likely be a bumpy road to success without the funding that you need in place.
Ultimately, while a bad credit score can limit your funding opportunities, it doesn’t take away from any industrious business skills that you have. So, it’s absolutely possible to start a successful business, no matter your credit score – just be sure that you have your finances in check, and carefully weigh up your funding options if you need to borrow.
