If you are running a business, there is no way you can get around without a good Credit Score. Find out why.
So you plan to start a new business?
Well, great but do you have a good Credit Score?
Don’t be surprised if your next visit to the bank introduces you to the reality of credit ratings.
Anywhere you go these days – any financial product you seek – the first thing they will ask you is whether you have a good Credit Score. For the uninitiated, a Credit Score is a three-digit number that evaluates your finances based on the way you handle your credits. Say, for instance, you have a Credit Card that you have been using for the last 5 years. You make your payments on time and follow the 30% rule on credit usage. In your case, there is a good chance that you may get a Credit Score of 750 or more.
A bad Credit Score, on the other hand, is the harbinger of doom. To get a perspective, think of premium Credit Cards, low-rate loans and special discounts, well – that’s it, think no more because they are out of bounds now.
If you are running a business, the situation is twice as precarious.
Can you imagine receiving your first bulk order and then getting rejected for a loan because your Credit Score is low?
If you have a bad Credit Score, it’s perhaps time to give your finances the attention they deserve. While you chalk out a strategy that’s best for your business, check out the reasons why your Credit Score is an important asset to have.
Additional Reading: 7 Shockingly Simple Reasons Your Credit Score Isn’t Improving
Goodbye, Business Credit
With a bad personal credit record, don’t expect lenders to approve any of your business loans. Every time you apply for a loan, the lender checks your credit history.
If you have preserved a stack of unpaid Credit Card bills or have a curious history of missing EMI payments, rest assured your lender will see you as an irresponsible borrower who may never pay them back. As a result, your chances of getting a loan would be as good as India’s chances of winning a football World Cup.
It’s quite simple. If you’re already incapable of handling your personal credit, there’s no reason why lenders will trust you with a business loan or a Credit Card.
Additional Reading: 5 Terrible Financial Habits That Could Run Your Business Into The Ground
Funding? No Way!
Every business, at some point or the other, requires a bit of external funding. Think angel investors and venture capitalists. The moment you reach out to an investor for financial help, the investor would want to find out whether you have enough credibility to sustain a business. If you have a spotless credit history, it should be a cakewalk for you. However, with a chequered past, you can forget all about Series A, B, C, and D.
Additional Reading: How Your Credit Score Can Prove Your Credit Worthiness
Pay More For Loans!
Even if you do manage to get a loan despite having a relatively poor Credit Score, don’t throw your arms up in the air yet. There’s a good chance that you will be having to pay a hefty fee for it.
While it may seem that a super-expensive loan is better than no loan at all, the reality is, it isn’t. Paying off those high-interest rates may require you to trim down your monthly expenses and live off coffee and bread for a good while. Add to that, the rising business costs and voila! There is just a crumb of luck separating you from the disaster of debt.
Additional Reading: How To Get A Business Loan
Business Relationships? No Match Found!
To run a successful business, one of the primary things you need is—good relationships with vendors, customers, investors and other people. By risking your financial position, you’re also putting these precious relationships at risk.
Why would anyone want to be in business with someone who runs a possible risk of going bankrupt? So, instead of blaming them, it’s time you start focusing on maintaining your personal Credit Score (and your business credit as well).
Additional Reading: Swipe Right On These Credit Cards
Fresh Talent? Forget About It!
Before applying for a job, most people research well and find out everything about the company. If you have successfully tarnished your company’s reputation, you can’t expect people to apply for jobs or accept your offers. If you destroy your personal credit history, you also put your company’s financial future at stake. By doing that, you ruin your relationships with vendors, customers, new talent and every other stakeholder who is vital to your company’s growth.
Additional Reading: Terrific Ways To Build Your Credit Score
Whether you have an established business or you are planning to start one, maintaining a good Credit Score is of extreme importance. While you start working on it, we can help you find the best tools to grow your business.