Having a bad credit score can not only hinder you personally, it also can affect you professionally. The good news is that personal bad credit doesn’t necessarily exclude you from building your business credit. Here are five ways that entrepreneurs can get around a bad credit score.
1. Use Your Business Assets
If your small business already has assets, like furniture or inventory, you can use those assets to secure a business loan. If lenders see that you have assets, they’re more inclined to approve a business loan because if you can’t make your loan payments, they can seize those assets. But you need to understand that if you default on the loan, then the lender has the right to sell those assets.
2. Discuss Your Options With The Small Business Association
The goal of the U.S. Small Business Association or SBA is to help you plan and grow your business by connecting you with lenders. You’ll want to speak with someone at the agency because it has several small-loan programs available, but these programs do have credit requirements. Now, if you don’t meet the credit requirements for an SBA loan, don’t fret, because the agency may be able to help you find loans from other sources.
3. Take the Nontraditional Approach
If your credit score is bad, you’ll probably want to avoid traditional lenders like banks because the chances of securing a loan are slim. But, many nontraditional lenders are willing to invest in high-risk loans, and some will even offer services regardless of credit history. Just be cautious and do your research first because there are predatory nontraditional lenders out there, and you don’t want to put your business in a bad situation.
4. Ask Family And Friends
If you’re hard-pressed and have exhausted all your options, like trying to secure a loan and reaching out to SBA, then ask your friends or family members for a personal loan. A loan from family and friends could be a great option because you might get better terms, but take advantage of this opportunity to work on improving your credit.
5. Work On Your Credit
Whether you secure a high-risk loan from a lender, or your family and friends lend you money, you’ll still want to work on your credit. It might take some time, but improving your credit score is the best option for the long-term success of your business. You’ll want to check your credit report annually and make timely payments to debt collectors so that you can resolve your debts. Also, be sure to dispute any inaccuracies and keep your record clean.
As your business grows, a good credit score will help you to secure loans with better interest rates, which will benefit you financially.
So, as an entrepreneur, having bad credit is not the end of the world. Just remember, there are lenders out there who may be willing to take a risk, but working on your credit is ultimately the best option for your business.
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