Your credit score can affect you in a number of ways and this can extend beyond your personal credit abilities. Many small businesses feature an interplay of personal finance and business finance. Did you know that a study by the NSBA found that 27% of US businesses were not able to secure their required funding? Furthermore, 25% of them said it prevented them from expanding.
With the link between personal financial health and business financing needs, a bad credit score can influence your business’ ability to expand and succeed. To avoid these side effects, there are many tools and information resources available to business owners. If you are one of the many entrepreneurs that are looking for help in overcoming these effects, Crediful can help refinancing with bad credit.
One of the most important ways a poor credit score can affect your business is by restricting your borrowing ability. When seeking funds, banks and lenders will look at your business credit score and your personal credit score. According to the Small Business Administration, a total of 65 percent of small businesses utilize a credit card or business loan. A low score signals to the lender that there may be an inability to repay the loan in the future or an inability to effectively manage your finances. To your creditor, this can be seen as too risky.
Although some small businesses do manage to secure financing with a low credit score, a higher premium is often charged to compensate for the higher risk. Therefore, financing may not be as flexible as many other small business loans. Higher interest rates and finance charges then filter down to your business’ bottom line, impacting the profit margins.
Trade & Creditors
A good credit score is not just vital in securing business financing but may also affect your interactions with creditors. Many vendors including property real estate companies consider your credit score when determining whether to do business with you. This is especially applicable to trade creditors as their credit terms are often adapted and your business may be faced with a very short repayment deadlines.
Poor credit can affect your ability to secure any financing at all and therefore, chances of your business even getting off the starting blocks may be very slim.. If this happens, you may be forced to consider alternative forms of financing or the use of collateral such as your home.
However, there are ways and many financial tools to help you turn your credit score around. Although being hampered by your credit score can feel defeating, there are many small business grants and lenders specifically for people in your situation.