Bad Credit Business Tips: Know Your Credit Score Before Applying for Financing
Credit can play a major role in shaping the way small business owners expand their operations. A bad credit business loan or alternative is a different product from a traditional small business loan, and depending on which product is being used, strategies will need to be tweaked or abandoned and replaced accordingly. In the interest of saving time, knowing what options your business will qualify for and which are a stretch is important, but that’s not the only reason that small business owners should know the strength of their credit scores before they apply for financing.
Bad credit isn’t the only thing that can show up on your reports. For small business owners who have bad credit, when their reports are pulled they should understand that other financial issues they may have had in the past will also show up. Depending on the service being used to report on them, things such as tax liens, foreclosures, open balances and bankruptcies can show up as well as a credit score. This information, it should be noted, has the potential to be incorrect. In a recent article from Forbes, an anecdote around an mistaken report had a man appear in a look-up as owing balances totaling $750K with his brother listed as his business partner, which wasn’t actually the case. It’s not that the person’s personal credit was actually shot, the case revolved around the concept of “business credit” that attempts to create a report on the business including industry types and years in business. Verifying that this information is all correct before applying for financing is an important thing that small business owners who are looking for funding might not normally think about.
Keep track of your personal information. Small business owners should remain vigilant in regards to how their information appears to others, as well as how it is cataloged internally by their own companies. If their status changes, say, from a DBA to an LLC. or they finish paying off an advance, they should properly document the changes and make sure they are reflected on pertinent reports concerning their businesses before they become issues down the road and in order to prevent the loss of critical information.
Photo Credit Kaiyan on Flickr