Contrary to what you may think about business owners, not everyone starts out with great credit. In fact, if you were to survey a room full of self-employed business people, you may be surprised to find out that the average credit score at the beginning of their business journey was much lower than you would have thought. While many financial planners would discourage those with poor or lacking credit from getting into the business owning game, there are definitely ways that even those with seriously low credit scores can get ahead in their industry.
Stay With Small
You’re a small business, so you want to get in the habit of supporting small business. In general, small community banks and credit unions are more likely to consider family issues and other personal issues when looking at loan applications and conducting interviews with potential loan recipients. As well, small banks are bound to be looking at a combination of your current accounts, business or personal. A large box bank will be more likely to turn you down and much less likely to be flexible in working with you. This is partially because large banks have very specific guidelines regarding lending.
In all money matters, shopping around for the highest loan at the lowest interest is guaranteed to leave you happier than if you were to jump on the first loan offered your way. Take quotes from each individual that you meet with in order to pit one bank against another in a bidding war for your business. Some people find bartering is tough, but it could be worth the percentage you get taken off your loan in the end.
Establish Business Credit
The minute that you create your corporation or LLC, you need to open a business bank account with a small credit union or bank in order to begin a financial history. A lender often requires proof that your business has been around for a little while financially, so they could possibly reject you if your company looks too new. Once you’re approved for your loan or business credit card, you will want to use the opportunity to build up your business credit, one purchase at a time. Ensure that you pay your bills on time in order to avoid negative issues that you’ll regret later. Keep tabs on your spending and compare it to your projected budget each month in order to keep yourself on track in your business finances.
This guest post is from Allison with CreditReport.org.