When the term “bad credit” is mentioned, most of the people think it as an individual problem. How a person with bad credit score struggles in finding financial support and how he/she has to deal with the high-interest loans when approved. This is similar in the case of businesses where a credit score is given to the firm on the basis of their financial performance.
Yes, there is no denying the fact that personal credit score and business does not have any direct connection, but if you are running a start-up business and have just started your entrepreneurship career, then your personal credit score will play a role far more important than you can even comprehend. In this blog, we will be discussing how having a bad credit score can affect your small business as well. So, let us get started.
The Negative Impact of Poor Credit Score on Small Business
- Getting a loan can be challenging
Firstly, as you have just started your business, so there will be little or nothing in the name of business credit. Therefore, if you apply for a business loan, the lender will be left with no option than checking your personal credit score which you have not managed to maintain, the chances of getting the approval of the loan will be very less from the banks or any other standard financial institutes. Therefore, the best you can do in this troublesome situation is that rather than just focusing on getting the fund for your business, try improving your credit score in the first place. For this, you can apply for installment loans for bad credit by getting in touch with the direct lender who specialises in such loans.
- Difficulty in utility and supplies
If you are thinking that lenders are the only one who will be checking your credit score, then you are highly mistaken. There are many other providers who will also be going through your credit score. On the basis of that, they will be fixing the amount that you will be offered for their service. Chances will be there that these agencies might even ask you to provide a certain deposit in advance in order to reduce the risk involved. Well, there is nothing to feel upset about, as this is how the industry works so you have to keep according to the norms. The biggest concern will be the distributors who can simply refuse to do business with you and provide you with supplies because of your bad credit rating. If somehow, they accept to provide the raw materials and other supplies, then they may charge you more than offered to others.
- Wages could be compromised
If you are delaying your bills and struggling in making the monthly payments, then there is a chance that you could be filed for a CCJ by the agency or the lender who can even sue you. And if the CCJ is declared, then a chunk of your wage will fall into the hands of the lender. Well, this is something that is not allowed anywhere if you are planning to start your own business. In this case, freelancing income can be exempted but if you are getting a monthly paycheck, then the lender might try to take that part of your income as well. This can prove to be a major problem when you have been using your income to invest in your start-up business. So, it is better to take initiative from your side and apply for cheap short term loans in order to pay the bills that have been delayed for quite a long time.
- No approval for leases and other business accounts
If you have been turned down by the agency where you have applied for a new cell phone plan or contacted a dealer to rent a property for your office space multiple times, then chances are good that they must have done a credit check for sure. As your credit rating was not in good shape, your request was being declined by the agent. This will also be applicable if you are planning to lease equipment for your office as the agent will go see your credit score as well before saying “yes” to the deal. Well, the reason is quite obvious that they don’t want to do business with those who do not have a good record of borrowing as it gives them an impression that you could end up delaying in their payment as well. Therefore, they don’t want to take such a risk.
Now, by far, you must have understood the role of your personal credit score for your business. Thus, if you don’t have a good credit score, then it’s time that you take some serious action as early as possible and find ways to improve it.