Borrowing is fun until you’ve ruined your credit score and all lenders treat you like a leper!
Keep that in mind when you have the luxury to run your small brand on a business credit line or bank loan. Don’t overutilize your limits, spend carelessly, or unleash new wheels on a commercial loan. Because that’s where it all begins, then soon, you start struggling with repayments and harming your credit score significantly.
Before you realize, your cash flow is a mess, and to make matters worse; your lenders are no longer willing to give a hand.
How Bad Credit Can Limit Access to Business Loans
Poor credit can limit your access to loans in the following ways;
- Hinders your expansion initiatives
Small business growth is easier said than done. Many times, merchants require financial support to seize expensive or time-bound opportunities. Because you rely on external funding sources, it’s crucial to preserve your vital link to them–a perfect credit score.
Anything lesser than that will deny you a small business loan from any lenders who perform a credit pull before approval.
Because growth is a process, you want to pay loans in good time and form a strong borrowing relationship with lenders to increase funding access.
- Rejected loan requests
Borrowing carelessly leads to a poor credit store. A bad score means you won’t secure a loan with any lender who insists on a credit check.
Most of these creditors have a selection criteria, including a credit score limit below which your request is rejected.
Yes, you still have access to bad credit loans, but these are expensive and sometimes difficult to secure.
- Expensive Insurance Premiums
A poor score is a warning sign for insurance providers. They consider you high-risk and will likely set the highest premiums for your small company. Yet insurance is essential in protecting any small business from potentially dangerous liabilities and lawsuits.
- Affects you supply chain
A strong financial foothold is essential in running a successful small business. As operations continue, you’ll need discounted sales from your suppliers. This then translates into more profits when you finally sell to buyers.
With bad credit, most suppliers won’t let you enjoy such discounts. Many suppliers check a business’s credit score before trading with merchants.
Call To Action
Start thinking differently if you’ve long regarded your credit score as “just another formality.” As hinted above, bad credit can take a toll on your business and threaten to bring it down. Begin by checking your score from one of these three credit bureaus; Equifax, Experian & TransUnion.
Author Bio
Michael Hollis is a Detroit native who has helped hundreds of merchants with their small business loan and payment solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.
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