Everyone is aware of just how much bad credit can affect your life. It can wreak havoc on your financial situation. Poor credit leads to higher interest rates on things such as personal loans, mortgages and credit cards, and that’s if you can even get approved in the first place!
The impact of bad credit on your business is not something to be taken lightly either. In fact, many first-time business owners make the critical mistake of thinking that their personal credit doesn’t matter to their business. In reality, it is the exact opposite of that. If you are a first-time business owner or your business is a start-up then the impact of bad credit on your business is an even more serious matter.
When applying for any loan – personal or business, lenders will take a good look at your personal credit during the application process. After all, what better way is there to assess your risk as a borrower than by looking at your personal credit score. This is especially true if you don’t have a business credit score yet.
What is the impact of bad credit on your business?
The reality of it is that a poor business or personal credit score can lead to a number of problems within your business. The impact of bad credit on your business can vary drastically, so let’s look at each problem in further detail to gain an understanding.
1. Issues with loans
If your credit score isn’t good enough, you may be rejected outright for a business loan. If you have bad credit, applying for a loan from a traditional lender can be a huge struggle. This is why so many people are turning to alternative lenders for bad credit loans for their business.
However, you may find that alternative lenders tend to charge higher interest rates compared to banks. This is where the impact of bad credit on your business becomes prominent. Almost all new businesses need a loan at first or will in the course of the business’s lifespan.
Just keep in mind that all small business loans should be treated like any other investment. You should look into the risk and rewards and weigh them up before committing to anything.
2. Problems with inventory, supply, and utility
Contrary to popular belief, it isn’t just lenders who look at your credit score. In fact, many different providers also examine your credit score when you request services. They will also check out your credit score when deciding how to charge you. Unities may also even choose to ask their clients with bad credit to pay an additional deposit to ensure payment. The same applies to real estate companies.
They run a huge risk of their clients pulling out of leases and defaulting on scheduled rent and maintenance payments. Many different places may charge an additional deposit when you request services if you have bad credit. So, just keep that in mind when you are looking into this.
3. You may not be able to start your business
When speaking realistically, a lack of capital can prove very fatal to your business. Many people fail to see just how bad the impact of bad credit on your business can be. One of the biggest obstacles you face is getting enough capital to fund startup costs such as:
Without adequate financing for these things, things start to get hard. Getting your business off of the ground is one of those things that may begin to prove difficult. This is the last thing you want after you’ve put so much time and effort into your venture. If your business is being held back because of bad credit and you need financial support to get going or to grow, then you can always seek other, more unconventional methods like:
- Crowdfunding (a brilliant option).
- Funding your business with personal savings.
- Asking friends and family for help.
Can I get a business loan with bad credit?
It can be really difficult to receive a business loan if you have bad credit. You are highly unlikely to be approved for finance by banks, but if you are willing to pay higher interest rates and potentially secure your loan against personal assets, then a 3rd party bad credit business loan could still be a solution.
The reality of it is that bad credit makes it harder for you to turn your dreams to fruition. The impact of bad credit on your business can lead to rejected loans, high-interest rates, and problems with utilities, space, and inventory. It can even force you to abandon your great business idea before it even gets off the ground which is highly disappointing.
How can you get help with the impact of bad credit on your business?
With companies such as Bad Credit Loans able to help, you will still have the opportunity to receive business finance even if you have bad credit. Additionally, companies such as Clean Credit are credit repair specialists who could remove negative listings, defaults and judgments to clear your bad credit and improve your score.