Can A Bad Credit Rating Stop You From Becoming A Successful Small Business Owner?


A lot of people these days are interested in the idea of becoming self-employed or starting a small business. It is easier to do now than it has ever been before. This is thanks to the many opportunities presented by the internet for people to start businesses without needing costly things like office premises, and because they can work with people from all over the world to promote and sell their products or services globally. 

However, a lot of businesses do still have some financial overheads and outgoings and you may well need to consider getting loans or credit at times when running a small business. If you are someone who has a bad credit score, this will be a lot more difficult, and so you may wonder whether or not a bad credit rating should actually prohibit you from starting the venture you have planned at all. Here we are going to look at how credit ratings can affect you as a small business owner. 

Your Options In Terms Of Funding 

If you do not currently have the capital you need to start a business and you have a bad credit rating, there are still options available to you in terms of funding. There are loans for people with bad credit, and while these can be more expensive than the loans available to people who don't have that credit problem, they can still be useful for borrowing small amounts to help you get started and on the way to making significant profits. 

You can also think about other ways of getting finance for your small business venture, such as asking for investment from people you know, bringing onboard a partner who doesn't have credit issues or who can provide the capital, or even looking into things like crowdfunding in some circumstances where your idea may be able to capture the imagination of the general public. 

Limited Access To Other Financial Products 

The initial start-up capital you may or may not need is only one part of what it means to run a business from a financial perspective. You may later need other financial products such as a business credit card to help you get over periods of difficult cash flow, or you may want to later expand your business and do things like open an office, take on new staff, or invest in better web design. You will find that as someone with bad credit rating, you have fewer options when it comes to the financial products available to you. However, this is something that can be resolved because if you don't need these products immediately and are working on building your credit rating, you could have better credit by the time you actually need to apply. 

Lenders will also take into account the performance of your business as well as your own record of repaying debt, so a business that is performing well may enable you to have access to financial products you wouldn't be able to get as an individual. 

Work On Improving Your Personal Credit Rating 

As discussed, even if you can find good solutions for the lean start-up phase of your business, or you already have the capital saved up that you need, you may find times in the future when you need to consider financial products. Because of this, you will have a much easier time as a business owner if you work on building your personal credit rating at the same time as starting up your business. It can be relatively easy to improve the credit score by doing things like getting credit cards or loans aimed at people with bad credit and repaying them immediately each month. Doing this will mean that you do not end up paying any interest on your purchases and will build up a history of being reliable as a debtor. 

Don't Let It Stop You! 

Having a bad credit rating is not a permanent situation, as long as you do something to resolve it. It may be tempting to put off starting your business until you have a better credit score, and this is certainly an option. However, if the money you need to start the business in the first place is something you already have access to, or you were looking at starting a business that doesn't really require much financial investment at the outset, then there is really no reason to hold back just because you have bad credit right now. Often, the best thing to do is to start the business and begin making money while simultaneously working to boost your credit rating

It does take time to repair bad credit, but you are looking at period of months rather than decades to be in good standing, so don't let bad credit keep you from your dreams, and if you have the means to start your business before you repair your credit, there is no reason not to work on both things at once.


I hope you enjoyed this article about whether a bad credit rating can prevent you from becoming a successful small business owner.

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