If the timing is off for getting a loan, you can make sure that’s only temporary. What you should do is build up your credit, and here’s how:
1. Understand how credit works. There is such a thing as a business credit score, which factors in things like whether your business makes late payments or is in debt. Be sure to also remember that as a business owner, you basically are the credit representative of your company. Your personal credit score, factoring in things from credit cards to car payments, is a big factor when a bank is deciding whether or not to lend. Don’t lose heart; there are positive things you can do to build up credit.
2. Start small, with the basics. If you personally have bad credit, make sure business and personal expenses are separated. Call collections agencies and set up what regular payments you can afford. Pay all bills on time or early.
3. Incorporate your business. If you haven’t already, and make sure there are bills under the company name that you are creating a good track record with.
4. Prepay everything you can. Not only does prepaying bills often secure you a discount, when it comes to your credit, the more things that are already squared away and paid for, the better.
5. When you ask for funding, ask for the smallest amount possible to cover your needs. This will increase your chances of getting a loan and being able to repay it. You don’t want to saddle yourself with more debt than necessary, and you certainly don’t want to wind up with a large debt you can’t afford to repay.
Planning for the future
There are probably understandable reasons for your bad credit. Most of us are still bouncing back from the recession, and some businesses were hit harder than others. Whether or not you decide to get a “bad-credit loan,” building up your credit is planning for the future of your company. Once you raise your credit score, it will be much easier to secure funding as your company grows.