This week we take on a topic that nobody ever really wants to talk about: credit in business. To say that credit is an issue for most Americans these days is an understatement, but since this blog is about professional development, I’m going to talk today about how credit (good, bad, or none at all) can affect your ability to do business.
“Towan, how important is credit?”
In many cases, credit is the lifeline of your business. It’s not uncommon for entrepreneurs to have compromised credit as they build their business, but you’ll have to clean it up to secure the financing to grow your business. Repairing your credit takes time, patience, and effort, but it’s a necessary part of life.
Here are some tips to help you repair your credit:
- Contact creditors and negotiate payment terms and plans to decrease your debt.
- Work with a mortgage lender to assess your ability to purchase a home; the mortgage lender can rescore your credit as you pay things off.
- Assess your assets and liabilities. Are you making high monthly car payments that are taking away from your ability to pay off other debt? Your score could improve a little faster if you reduce the amount you spend on certain liabilities or on non-money-generating items (such as a fancy car) and double up on your debt payments. If you’re in need of a loan, identifying what assets you have can help you negotiate a better rate if you’re credit isn’t perfect.
- Pay your bills on time! This seems like a no-brainer, but life happens, and sometimes business owners find themselves getting sued because of an oversight or an intentional non-payment. Lawsuits do not bode well for business.
With startup culture being the latest craze in business, a lot of entrepreneurs are not considering their credit issues when going into business. Unless you want to rely on GoFundMe or Kickstarter for all your future endeavors, you will need solid, if not great, credit to secure a business loan or line of credit. Remember that your personal score affects your business rating, so it’s best to try to rein in any personal debt before seeking financing.