Is it possible to get financing for a business when you personally have bad credit? I get this question all the time from small business owners. They are looking for strategies and tips to obtaining financing when their personal credit is very poor. So, is getting financing a dead end when you have bad credit? The quick answer is no. There are always ways to obtain financing for a business regardless of what your personal credit looks like; the key is knowing where to look and how to prepare your company and yourself before you apply for the financing.Here are three steps to obtaining financing when your personal credit is poor:
1. Don’t ignore your personal credit. Just because you may be able to obtain financing with bad credit it doesn’t mean you should ignore your personal credit. You should always monitor your credit and take steps each quarter to improve it. There are financing options you won’t have access to if you have bad credit, so you need to constantly work on improving your score. In addition, there will be several financing options that charge you more interest because you have a lower score.
A simple way to look at this is, if you have poor credit you will have fewer options and pay more in interest. So make sure you continue to improve your overall score as you build your business and not ignore it.
2. Establish a solid foundation for your business that puts it in compliance with the lending markets so you can start to obtain credit in your business name without the use of your personal credit. This is what Business Credit Services specializes in, getting companies in compliance and improving their chances of obtaining credit. Once you have a solid foundation (what I refer to as “Being in Compliance”) you can start to apply for trade credit from companies willing to provide credit strictly based on being in compliance. They don’t look at personal credit scores to determine your credit worthiness. I refer to these types of companies as Tier1 vendors. Once you have built a good payment experience in working with these vendors you can then apply with Tier 2 vendors and again obtain credit under your business name only.
You can learn more about business credit and our programs here http://bcscredit.com/business_credit_tab/
3. Know your options. There are several alternative lending sources that don’t rely on your personal credit. Depending on the type of business you have and the financial statements of the company there are options such as merchant account cash advances, factoring, purchase order advance, leasing, corporate credit and more that don’t always rely on personal credit scores.
Take the time to research the various options and work with an expert in small business financing. There are a lot of scams out there as well, so don’t get caught up in the “too good to be true” myths that some companies offer for high dollar amounts. You can read about scams at: http://bcscredit.com/business_credit_tab/scams.php
I have worked personally with thousands of small business owners of the last 15 years and have seen people with personal credit scores of 510 still obtain over $250,000 in credit for their business. I worked with one client who had a 620 fico score and we were able to get them $700,000 in financing. It can be done with the proper foundation, direction and advisor.
David Gass – Founder
Business Credit Services, Inc.
www.bcscredit.com
