Business in Motion is the weekly radio show started in 1995 with host George Torok. He interviews business leaders from small to large business. This blog is an extension of the business insights, perspectives and secrets to success. Topics include entrepreneurship, leadership, success, management, innovation...
7 Reasons You Can't Be an Entrepreneur with Bad Credit
The hardest thing about being an entrepreneur is getting
people to latch on to your business idea. As great as it may be, when it comes
to finding financing and investors, you need much more than a great idea to get
others to put their own money into your project. This becomes much more
difficult if you, yourself, are not in good financial standing personally. We
all have mistakes looming in our financial records, but, if your credit score
is dangerously low, you may not be able to start a new business anytime soon.
Here are some reasons why:
will be difficult to find investors.
Investors don't just want to look at your business plan;
they want to look at the whole picture. Anyone who is considering investing a
major amount of money into your idea will desire as much information about your
financial background as possible. If you can't take care of your own finances,
how can you be expected to manage a business? You will need an extraordinarily
brilliant business concept to make up for bad credit, if you want to secure an
co-signers might be dried out.
If you've had credit issues in the past, there is a good
chance you also had to go to friends and family for loans. It's difficult to
find yourself out of cash suddenly, and most of us with poor credit scores have
had to go through some sort of financial downturn in order to get there. But,
when it comes time to now start your business, you will need to finance some of
the expenses. If you have bad credit, and the people in your life are reluctant
to continue supporting you financially, you could be out of luck.
look like a risk to banks.
This is a big one. Even if you do get investors, there is a
good chance you will need to take out some form of small business loan from a
bank. Entrepreneurs with bad credit are turned away from banks on a daily
basis. You can't expect your case to be much different.
Securing small business credit cards will be difficult.
There are plenty of credit cards that can be granted on the
spot, even with bad credit. The only problem with them is they typically have
hidden fees and crazy-high interest rates. If you want to secure a legitimate
business credit card, then you may have trouble taking out more credit if you
are already maxed out on some cards or lacking in upstanding credit in other
Financing business equipment will be more expensive.
No matter what you need to do to run your business, you will
probably need to purchase some amount of equipment. From trucks to printers to
baking supplies, there is no end to the expenses that come with daily business
will need extra resources for down payments.
Even if you do secure financing for business items, credit
cards, or loans, there is a very high possibility that you will have to pay
much more up front than you can afford. A substantial down payment is often
required of borrowers with low credit scores, so if your credit is bad, this is
another area where you will have to cough up some extra cash.
may not get the office space you need.
Another important part of running a business is having a
space to do it in. Just as you may have problems securing loans and lines of
credit, you could have equally trying times getting someone to rent you a space
to work. Property managers want to make sure they are taking on residents who
are financially responsible and have very few late pays on their records.
Stella Walker is a
writer for Creditscore.net and an avid researcher of credit and insurance news.
She is especially passionate about protecting consumers from credit card scam
and providing information about good credit standing.