You may be trying to start a business, or have one that's in its initial stages. Your idea is great, your plan is flawless, and your product or service is ready for the fast lane. Only problem is, that super-charged, can't-miss-small-business of yours is sitting by the side of the road. It's stuck, and it's out of gas.
The analogy may not be great, but if you're in that kind of situation, you know what it's all about. Your personal credit rating is less than stellar. You found out just how bad, when the bank's Business Loan Officer gave you a look of horror when you told him what you wanted to borrow, and why.
Let's face it, he probably could not wait to get you out of his office fast enough. Is there anything you can do to jump-start this situation? Yes there is. In fact, there are a number of avenues you need to explore.
First things first. There are three credit reporting agencies, Equifax, Experian and TransUnion. You want to get your tri-merge credit report, which is a report from all 3 credit bureaus. Once you get them in hand, you'll have a clear idea of exactly where you stand and just as importantly, why.
Review each and every report. Look for errors, because (guess what), the credit bureaus do make them. Maybe a bill they're reporting as unpaid, involved a dispute. Maybe a credit card purchase was not yours. If you find any glitches, report them immediately to the credit bureau involved. You can also enlist the services of an established credit repair company, if you're not sure how to handle the disputes yourself.
Creating a business credit profile can also be an answer to your credit issue. By creating a business credit profile, you can start establishing credit for your business, which is separate from your personal FICO score. Establishing a business credit profile can help you get your business started while working to improve your personal FICO score. Once you establish your business credit profile your business can start applying for business credit cards and other types of business financing.
But, when you get business credit cards, keep your personal and business credit separate very separate. Many people fall prey to the temptation of using business credit cards for personal expenses. This is more than a red flag to business lenders, it's a giant red balloon. Commingling your funds can cause many problems for your accountant and attorney. When you commingle your personal and business funds, you open the door to suitsuits and your bookkeeping becomes a nightmare.
Business credit cards can be a great source of financing. One misconception is that business credit cards have a high interest rate. This just is not true. Many business credit cards fall in the interest rate range of 8-14%. But more importantly remember this; it's not always the cost of money that's important, but the availability of money. Would not you like to have an extra $ 30,000, $ 50,000, or even $ 100,000 right now to start or expand your business? Make sure you are diligent about making payments on time and, two things will happen: First, the credit card company will court your business, and probably offer you a credit line increase. Second, your credit standing will improve with the bank. Bank's love it when you've demonstrated the ability to pay off a loan even if it's not theirs.
Finally, make certain that you use your credit wisely, and strictly for the business. And more importantly, to improve the business new equipment or hiring employees, marketing, whatever it takes. This will show a Loan Officer that you're serious about what you're doing, and will make you a more attractive loan candidate.