Tuesday, November 06, 2012

7 Reasons You Can't Be an Entrepreneur with Bad Credit


Bad Credit on Entrepreneurs
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:

1. It 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 investor.

2. Your 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.

3. You 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.

4. 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 ways.

5. 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 operations.

6. You 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.

7. You 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.

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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.




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3 comments:

Negi said...

Thanks for great information you write it very clean. I am very lucky to get this tips from you


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Jody O- said...

Great Information, it speaks volumes...Thank-you!

Jody O said...

Easy to read and Great Info...Thanks!