Is good credit essential for any business? | Get Financial Freedom Tips | Transform Your Financial Future


Monday, October 20, 2014

Is good credit essential for any business?

Credit is the oil that keeps the wheels of business turning smoothly. Without credit, the engine of business would seize, and whether a particular enterprise is big or small, it would eventually grind to a halt. For someone wanting to set up a new business venture or seeking to expand an existing one, then access to credit is all but vital.

Why business needs credit

While many people will dip into existing savings to fund a new venture, there is every chance that it will not be enough. He or she will also need to borrow. The same applies to existing businesses seeking to expand and take that much hoped for step toward success. Money will have to be borrowed. However, the likes of banks will review a particular individual’s or business’s financial track record and credit score, and unless things look perfect, they may be loath to lend.

Is good credit essential for any business?

Borrowing is all but essential for startups and expansions, so it can be argued that good credit is vital for any business. Is that necessarily so though?

Securing a business loan with a bad credit history

There are two things to consider when attempting to secure a business loan, particularly for the entrepreneur with a bad credit history. First, it is important to separate personal credit ratings from business credit ratings. Many people attempting a business startup will have a poor personal credit rating through force of circumstances. For example, some may have been forced down the self-employment route because of a job loss leaving them with little spare cash to pour into the enterprise. Such things as illness or a difficult divorce settlement could have hit personal finances. Whatever the reason for the poor credit rating, even if they present an excellent business plan to the bank, they may find this particular avenue for borrowing closed to them.

That banks may be loath to lend to an existing business of any size is also likely to be the case if the credit rating is not good. Because being able to secure good credit for business is so important, it is then a case of trying to find loans from alternative sources.

What alternative sources of credit are there?

If a startup or existing enterprise is refused credit by the banks then all is not lost. There are alternatives. One example is to use a company that offers bad credit small business loans., which provides loans to small businesses. Here, businesses can secure the credit to ensure they have the cash to sustain their venture or ensure growth. This type of service is vital and even provides a lifeline for enterprises with a poor credit history that are unable to secure credit from traditional sources such as banks.

This goes to show that while good credit is not enjoyed by all businesses, there are alternative sources of funding available to keep them up and running and hopefully to help them grow and thrive.

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