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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Can Bad Credit Limit Your Business Prospects?
There are nearly 28 million small businesses in America, but don’t be fooled; entrepreneurship in the US is at an all-time low – and it could be due to bad credit.
Bad credit definitely has the potential to limit your business prospects. There are lots of different ways that you can finance your business – but most of these methods rely on good credit. However, it isn’t all bad news; the impact of your credit score will depend on the type of business owner that you are.
Here is how bad credit can limit your business prospects, depending on the kind of business that you run.
Will your credit score be checked?
If you are borrowing money your credit score will always be checked, whether you are taking out a small business loan or buying a laptop. However how your credit score is checked will be different, depending on if you are seeking credit as a limited company, a sole trader or a partnership. If you are a sole trader it is very likely that your personal credit score will be analyzed along with your business credit history.
If you are part of a business partnership the situation is very similar to that of a sole trader – except both partners will have their credit scores checked. This can be useful If one partner has a good credit score, but if both partners have low credit scores this could limit your business prospects. The final option is a limited company, and this will have a business credit score of its own. Most financing companies will prioritize the business credit over your personal credit, but they still have the right to check your personal credit score too.
So what does this mean for you?
Basically, poor credit can limit your business prospects no matter what kind of business you run, but it is less of a problem if you work for a limited company or a partnership. If you have bad credit due to debt, one step that you can consider taking is taking out a personal loan to consolidate your debts. This could lower your monthly interest fees, which will make it much easier for you to clear your debt. After all, America currently has over $1 trillion in credit card debt, and high-interest rates are partially to blame for this debt.
A bad credit score may limit your business prospects, but you can still grow as a company if you consolidate your debts and make a clear effort to pay them off.
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