Bad economy can affect us in several ways. During the 2008 crisis, businesses and individuals suffered financially. Let’s not forget that it is also common that we end up with a bad credit score after a few financial errors that we did in the past. The sad news is that a bad personal credit score can impact your business.
First let’s discuss what credit score really is about. It reflects on your ability to pay your loan. A low credit score will most likely reflect badly on you. Therefore, you may have to improve your credit score first just to be safe.
If you are operating as a single proprietorship, this means that your personal credit is your business credit. It simply means that the bank will not look at your personal financial decisions separate from that of your business. In this particular scenario, you could end up getting rejected by a bank if you request a loan.
If you are paying late on your business credit card, then this will also reflect on your persona credit score. If you are not rejected from getting new loans, there is a chance that you are going to pay a much higher interest rate. In fact, this applies not only to sole proprietorship. Even corporations are going to be tied to personal finances.
How to improve your credit score?
It is always a good idea that you improve your credit score first before you even get a loan from the bank. One of the best ways to do this is by evaluating your current financial situation. If you are in debt, it is a good idea that you focus on eliminating these debts first. Make sure that you also pay your responsibilities on time. Slowly, this will affect your credit score in a good way.
One of the best practices that you can do is to eliminate the credit card balances first. This gives you the chance to apply for your business loan smoothly in no time. Next, you also have to use the calendar in order for you not to forget about your responsibilities.
Of course, it takes discipline to also track your expenses in order to pay for these responsibilities on time.
Lastly, you want to know your limit. This means that you have an idea on how much money you can spend using your credit card based on your income and other expenses.
If you are the type of businessman who is struggling to get financed by banks because of your low credit score, it is always a good idea to fix your credit score first. If not, you will also have to look closely at other means of getting financed. Whether it is crowdfunding or the use of your own savings, these are other options that don’t require a good credit rating.
Having a bad credit rating shouldn’t stop you from starting your own business. Often times, a good business plan can topple many challenges ahead. But of course, you will need to be creative at times in order to make it work.