If you are considering starting your own business, checking your credit history should be on the top of your priority list. Whilst a bad credit history can affect your personal finances by making it more difficult for you to take out credit cards, loans, car finance or even get a mortgage, those who are looking to become an entrepreneur can find that their credit rating can also impact their business. If you are hoping to start a business and you need to borrow money in order to finance it, here are just some of the reasons why a bad credit rating isn’t going to go in your favour.
Getting a Business Loan
If you have a poor credit history, one of the biggest ways in which you will be affected once you decide to start a business is when you apply for a business loan. When considering your application for business funding, banks and a range of business lenders will not only look at your business plan, idea and predictions for the future, but they will also take into account your personal credit rating and how well you manage your own money. If you have a history of missed payments, defaults and other financial problems, you will be deemed a much higher risk and may well be rejected for funding. For alternatives to a bank loan when it comes to funding your startup, there is the possibility of securing a bad credit loan.
Renting a Commercial Property
Your personal credit rating could also affect you if you plan to rent a commercial property, such as a shop, office or warehouse in order to base your business. When renting a property in the UK, there is often a credit check required in order to decide whether or not you will be eligible for tenancy based on your financial history and how likely you are to make payments on time each month. Although you may be able to get a guarantor to make it possible to get a commercial property, this can narrow down your options and make it more difficult to get your business set up in the location that you want.
When you run a business, others may need to run background checks on you for various reasons. This could include potential new partners, investors, or even clients who are planning to invest a lot into your business and work with you in the long-term. For those who are serious about investing time, money and effort into a business, it’s important to them that it will all pay off and therefore may well decide to run a background or credit check on you beforehand in order to determine the level of risk. Due to this, having a poor credit history could well ruin your chances of good partnerships or of others investing in your company.
If you have a bad credit rating and are thinking of starting a business, the best thing to do is be upfront about your credit rating with anyone who could potentially check it and work to find the best way forward.