Personal Credit Matters for Your Small Business
One of the biggest weaknesses of Small Business Owners is poor money management. Running almost neck and neck with poor money management is the lack of financial education. Financial education is important for consumers and equally as important for Small Business Owners. Over the years I have met so many talented people. They have a craft, a trade, a skill, a gift, or a hobby and they are very good at what they do. Some have dreams of opening their own business, while others have been prompted by friends, family members or admirers to open their own business. The most important thing they need in their eyes is money to get the business started. In many cases this leads them to a bank to get a loan. Even if they are able to get a loan, many of these individuals are bound to fail because they are experts at doing what they do but they are not nearly as good at running a business or managing money.
I want to focus on managing money. Paying your personal bills on time and paying back personal loans are factors in getting a small business loan. Some people may question what their personal credit card or car loan has to do with their application for a small business loan. They are completely separate, right? Wrong! It is important for you to understand that in the eyes of the bank, you ARE the business! Without you there is no business. Therefore, when you are applying for a small business loan, your credit is the businesses’ credit. If you pay your bills on time, then there it is highly likely that your business is going to pay its bills on time and vice versa. In fact, your personal credit is going to be reviewed as a major factor to determine whether or not you are going to be approved for a loan. This is good news for some. For many others it will mean that they will need to clean up their credit before they apply for a business loan – even if the loan is only $1,000 – $5,000. The bank’s goal is to get repaid for the loan and to make some interest too. But the main goal is to be repaid 100% of the loan.
The first step is to look at your credit report to make sure everything is accurate. 70% of credit reports contain inaccurate information. It is important to dispute any inaccurate information. Then you need to begin to pay off past due debts and/or debts that are in collections. For some these amounts may be astronomical, while for others these are small amounts that they have avoided for years hoping they would eventually just fall off of their credit report. Then, either while you are paying off these debts or after you have paid them off it may be a good idea to apply for a secured credit card or a secured loan. Since you are putting up cash in a savings account as collateral, there is usually a better chance that you will be approved for this type of a loan. This will help you to build and to rebuild your credit. Click here for more information about credit reports. This will put you on track to be more successful with your business. It may take you a little more time than you planned to get your business started, but you will be starting it on a firm foundation with better odds of being successful. While it is exciting to start your own business, it is even more exciting to build and to grow your business instead of having to shut it down because you did not have the resources and/or money management skills you needed to succeed . If you are thinking about taking that step to become a small business owner and you need a loan, I urge you to get your personal house in order first to give you and your business a better chance of surviving and thriving. All the best!
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