A Bad Credit Business Loans a Word of Advice to Other Entrepreneurs
With bad credit looming as one of the most restricting problems small business owners can experience, it can be helpful for those business owners who have worked their way around and out of bad credit to share some of the ways they were able to manage their problems and keep their business healthy. Many of the business owners that Horizon Business Funding works with on a daily basis are among those who have been marked with poor credit scores. The Great Recession that began in 2007 saw many Americans suddenly lose sources of income that they relied on to pay for mortgages, student loans and credit card debt. Small business owners were hit particularly hard, as they more than other borrowers rely on access to capital to keep their businesses moving forward and generating income. With real estate prices dropping as well as inflation, business owners found themselves with debt and little to no means of securing additional credit. And yet, many of these business owners found ways to make things work, and keep their businesses running despite the problems they faced. Here are some of the strategies employed by business owners with bad credit that allowed them to keep moving in the right direction.
Avoid credit, for the most part. When your credit is hurt, it can be tempting to burn your cards and focus on maintaining a cash flow where part of your revenues go to paying off your debts. However, part of getting out of the pit of bad credit is rebuilding your score. For this reason, business owners should consider getting a card that they can use for minor purchases and then pay off easily, in order to build up a positive payment history. In this way, you can avoid building more debt but still improve their FICO. Also, when paying off debt, making more than the minimum payments as much as possible will help tackle rising interest.
Trim the fat from your operation. When you are in debt, you are going to have to allocate a part of your revenue stream to paying off your creditors. For this reason, you should strongly consider evaluating your business’s main sources of revenue. An example of this would be a restaurant that offers 20 different menu choices. Buying ingredients for 20 different dishes can become costly, therefore, you should identify the top 10 dishes that are generating your revenues, and then simplify the menu.
Social media marketing can help sales. The great thing about social media marketing is that aside from the time investment that goes into it, it is free. This strategy will benefit all types of businesses, but in particular, local businesses can use their social media as a way to increase community engagement with their brand. Maintaining a customer base for your business is essential if it is to survive and if your credit is going to be repaired. It is imperative that business owners do all that they can to get their customers in the door and spreading the word.
Build on success. Bad credit can hold a business back from getting a loan, but if your business is at a critical juncture where it needs to grow, know that there are bad credit funding options available. The growth of a business should be an organic process, but it can certainly be jump started with additional capital. Focus on creating a long term strategy for the growth of your business, taking your credit score into account. Create realistic goals for growth, but ensure that they are ambitious in order to keep your business moving in the right direction.
Bad credit is a blow not only to a business, but to the morale of the owner. ‘it does not mean that there is no hope left. Many business owners are able to work around their bad credit scores, and grow their businesses while repairing them, and done the right way, you can too.
Photo Credit to Phillip Brewer on Flickr