If you have a small business that is newer, and you have not yet established your reputation, lenders will look at your personal credit score in order to ascertain the creditworthiness of your business. Your personal credit can have a ripple effect on your ability to grow your business. It is for this reason that small business owners need to take every possible step to shore up their personal credit in order to avoid negative repercussions that can keep their business from thriving.
Trout Associates is a trusted lender providing debt consolidation loans that can help small business owners improve their personal credit scores by helping them lower the interest rates they are paying on personal loans. This allows business owners to pay off their debts more rapidly.
How Poor Personal Credit Can Harm Your Small Business –
Loan Rejections –
According to Investopedia, in the aftermath of the Great Recession of 2009, loans for small businesses almost entirely dried up. Many business owners had both their business and personal credit take a strong hit in the poor economy. With lower personal FICO scores, small business owners found it next to impossible to get any small business loans, especially from 2008 to 2011.
High Interest Rates –
Investopedia also stated that, even as credit began to somewhat loosen after 2011, interest rates for most small businesses were very high. This has been especially true for businesses where their owners are not personally creditworthy. Of course, paying higher interest rates cuts into profits and lower your ability to be successful in your enterprise.
Higher Insurance Rates –
Without much of a track record in your new business, even your business insurance premiums could be higher if you have poor personal credit, according to Credit Karma.
Difficulties in Securing Utilities, Leases and Inventory –
All Business advises small business owners that utility companies, landlords and distributors may all want to look at your personal credit score before they decide to do business with you and under what terms. For example, you may have the utility company demand a large deposit in order to be able to begin getting power or water services.
Landlords and property management companies may not even be willing to lease space to your company if your personal credit is poor. If you are in retail, that could be devastating. Location is everything in retail.
You also may have trouble securing inventory on favorable terms, such as billing in 30 days, if your personal credit is poor.
Inability to Secure Startup Capital –
Usually, small business owners need startup capital in order to get the licenses, permits, beginning inventory, furniture, insurance and advertising in order to open their doors. If you don’t have good personal credit, startup capital sources will likely not be available.
What if Your Personal Credit Score is Poor?
With all of the potential for higher costs or being denied important services you need in order to run your business, it is essential to improve your credit score.
According to Experian, the following are some great ways to improve your FICO score:
- Pay bills on time, including your utility payments as well as those for your cell phone provider
- Don’t max out your credit cards – The ideal figure is using 30 percent or less of the available credit on a card.
- Don’t close paid off cards
- Only apply for credit you need
- Check your credit report frequently, so you can dispute dings that are unjustified.
What if You Can’t Pay Your Personal Bills on Time?
If you can’t pay your personal bills on time, you may profit from debt consolidation. Many people are in debt over their heads through high interest rates on credit cards and automobile loans. If this is your situation, you should consider debt consolidation services. Trusted debt consolidation services, such as those offered by Trout Associates, can help you begin to pay your personal bills on time by lowering your interest rate on all of your debt into one personal loan to pay each month. With the lower payments, you can attack the balance quicker as you pay down the principle. This will also improve your credit score, as you begin to make payments on time again.
How to Begin Improving Your Business Credit Score
According to Credit Karma, you also want to begin establishing your business credit as well, so you are less reliant upon your personal credit to fund your business in the future.
Some of the best ways to establish your business credit score are:
- Incorporate your business
- Have a separate business bank account and credit card
- Stay on top of your business credit report and dispute errors
- Establish better credit with a trade line
- Always at least pay on time, if not ahead
As a newer business owner, you will have to rely upon your personal credit to
help you get your enterprise off to a good start. Otherwise, you may be denied
important pieces of your success picture, like a lease or a line of credit from
a supplier. You also may have to pay higher fees in the form of higher
interests and deposits if you have poor personal credit.
If you are struggling to pay personal credit card debt, consider a trusted debt
consolidation firm, like Trout Associates, to help you consolidate your debts
at a lower interest rate and one monthly payment. Debt consolidation can give a
great boost to the credit score of business owners who are struggling to make
payments on high interest credit debt.