You already know that having a low credit score can affect your ability to get a car loan or mortgage. However, bad credit could also destroy your dreams of entrepreneurship, too. Unfortunately, most lenders are already reluctant to loan money to fledgling businesses. If you have bad credit, your case looks pretty bleak. Here is how your credit score can affect your business.
High Interest Rates
Working capital loans for small business in Atlanta can be a great way to finance a startup. However, your lender is definitely taking a risk with you, especially if your credit is not great. You may have to pay high interest rates in order to finance your dream of entrepreneurship. The more interest you pay, the more difficult it will be to repay the loan and make your business profitable. Therefore, you should keep those rates in mind when you write up your business plan.
Small businesses make up a large percentage of employers. Striking out on your own is as much part of the American Dream as owning your own home. Therefore, it’s no wonder that millions of new businesses get started each year. Unfortunately, many of them are destined to fail, which is precisely why lenders aren’t always excited to finance your operations.
The bank will take a close look at your personal credit score, especially if entrepreneurship is new for you. They want some reassurance that they’ll get their money back even if your new venture fails. If your credit score is low, they may even deny your application altogether.
There are still other options for obtaining funding for your company. For example, you can find investors or save up enough money to get started and take advantage of invoice factoring to keep funding the business.
Your personal credit score is important for obtaining a loan, but it’s also important to secure favorable terms for your operating expenses. For example, when you lease a building for your new store or warehouse, your landlord will need some reassurance that you can pay the monthly payments. This may require a sizeable deposit if you don’t have a good credit score.
Similarly, utility companies often run a credit check before they hook up your services. This has to do with the fact that you consume electricity and water before you pay for it. A good credit score can result in a lower initial deposit, which makes it easier for you to get the cash to start your business.
Working capital loans for small business in Atlanta are helpful in getting your business off the ground. If you want the best possible terms for your new venture, you should work hard to improve your personal credit score.