Bad Credit Doesn’t Have to Be a Funding Roadblock
December 20th 2018 at 4:58pm Published by firstdownadmin
Financial mistakes that you’ve made in the past can haunt you. You could be responsible and reliable with your payments now, but your previous actions will label you as a high-risk customer and an unwise investment. This is what happens when you are saddled with a bad credit score.
Find out how bad credit can affect you as a small business owner, and what you can do to avoid this frustrating roadblock:
How do you know you have bad credit?
If you don’t know what your credit score is, you need to go to a credit reporting agency and apply for a credit report. The credit report collects information on your personal finances, including your payment history, debt and public records. After gathering all of that information, it gives you an official FICO (Fair Isaac Corporation) score.
The FICO scores range between 300 and 850, determining whether you have good credit or bad credit:
A low FICO score means your credit history has not been responsible. You’re considered to be more of a financial risk than people in higher categories.
What does bad credit mean?
The consequences of bad credit will follow you through major financial moments in your life until the score changes for the better. People assume that your credit indicates your reliability when it comes to financial responsibilities, so a low score will mean that you are unstable or untrustworthy.
Here are some things that are harder to achieve when you’re living with bad credit:
- Renting an apartment
- Applying for a mortgage
- Applying for insurance
- Receiving professional licensing
- Buying a car
- Getting a cell phone contract
- Getting certain jobs
- Acquiring security clearance
Bad credit can also affect your ability to get traditional funding for your business. If you go to a bank to apply for a small business funding to help pay for your essentials and get your doors open, you are very likely to leave the building empty-handed. Your application has a high chance of getting rejected.
How do you fix bad credit?
It’s possible to repair your credit score so that you’re no longer considered a high-risk investment, but the process isn’t quick. It will take a lot of time and effort to get those numbers to climb to a safer zone.
It’s important to remember that some problems will sit on your credit report for years, no matter how often you pay your bills on time. A public record of bankruptcy will stay on the report for 7 or 10 years, depending on the bankruptcy chapter you filed. After the set time has passed, the bankruptcy can be deleted from the report.
The first way to repair your bad credit score is to look through your credit report carefully and send disputes to the provider whenever you spot an error or inconsistency. The corrections could change your score for the better. Then, you need to improve your finances by making all of your payments on time and getting rid of outstanding debts.
This is easier said than done. It could take years until you reach the “Very Good” category.
What about a business credit score?
Your business credit score covers your business’s financial history, which is completely separate from your personal life. Instead of using your Social Security Number, a business credit report requires an employer identification number (EIN). The score is between 1-100, with 100 being the best score you could achieve.
Unfortunately, your business credit isn’t a blank slate that can free you from the burden of your poor personal credit. Before your business’s doors can open, you will need to acquire funds. If you want to borrow funds from a bank, they’re going to look at your personal credit score to see what amount to give you or whether they should reject your application completely.
Your bad personal credit can also make it harder to get a business credit card. So, your personal credit can hinder your ability to build good business credit right off the bat.
What can you do to get the funds for your business?
When you’re trying to get a small business off of the ground, you know that time is of the essence. You can’t sit tight and watch your credit score slowly climb higher. You could be waiting for months and months for a positive change and still get rejected by a bank when you reach out for funding.
Instead of waiting for the tides to change, you can look for bad credit funding options so that you can get the business essentials you need and have your doors open as soon as possible. You don’t have to worry so much about your personal credit history dragging down your plans or destroying your chances of getting funded. You can always turn to First Down Funding for help.
One of the big differences between traditional bank financing vs business funding is that banks are notoriously strict when it comes to their applicants’ credit scores. If your score isn’t high enough, the bank is likely to regard you as a high-risk client and reject your application. On the other hand, alternative business funding doesn’t hold such a difficult standard when it comes to credit scores. It’s much more accommodating and flexible for the average business owner.
For instance, you could use a Merchant Cash Advance (MCA) to get a low-level financial boost and some additional stability. An MCA does not come with hidden fees, and it makes no mark on your credit file. This type of funding is available for any business that has been open for a minimum of 60 days, and it has an impressive approval rating of 85%.
If you’re a small business owner and you’re worried that your bad credit score is going to hold you back, you should contact us for more information about the funding options that are readily available. You can send us an email at email@example.com or call us at (866) 644-1353.
It’s hard enough to start up a small business without having to deal with a roadblock like a bad credit score. You don’t want your past mistakes in personal finance to have such a strong impact on your future in business. With the help of alternative financing, you can have the opportunity to move past the bad credit and push forward.