Micro-business growth opportunities often strike unexpectedly. And most times, seizing a niche requires finances. But sometimes, the amount you’ve saved may be too little—meaning you’ll need extra funding to initiate your project. There are a number of ways to you can go about it, but things work much faster if your business credit is in check.
However, small business owners forget that personal credit greatly determines whether you receive business credit or not. Any lender or business credit card provider will ask for a personal guarantee, so conditions will be unfavorable if you have a weak score.
Rarely can you acquire commercial credit based exclusively on your company’s credit record, unless your business is well-established? So the only way to enjoy the best business credit offers with a weak or poor personal credit history is to buff it up—build your credit profile.
Here’s how to build credit
1-Monitor your personal credit score
Though you can still access products like merchant cash advance bad credit, a bad personal credit means you’ll have a hard time acquiring a business loan.
And by the way, what’s your current score? Not many people keep track of theirs. Look up yours today at any of the three main credit bureaus (TransUnion, Experian, and Equifax)—if possible compare the three to spot any discrepancies.
A lender is looking for the following in your FICO score;
- Payment history
- Amounts owed
- Length of your credit history
- Your credit mix
- Number of cards owned
FICO scores fall between 300 and 850. Any score above 700 is great, anything below that requires rebuilding before you seek out business credit.
2-Settle your personal debts
Don’t leave any unpaid balances on your personal credit cards. The more they accumulate, the worse things get for you. Plus, you won’t easily get business credit if you‘re maxed out.
Pay attention to cards with high-interest rates & credit utilization to quickly boost your credit performance. Lenders usually work the ratio of your existing balance to your obtainable credit to get the credit utilization ratio— the lower yours is the better.
3-Separate your business funds from personal finances
You and your company are two different parties. Therefore, depositing business earnings in your personal checking account is a bad financial strategy. You need two separate accounts to serve these different purposes.
Running a business bank account along with a personal bank account helps protect your business and safeguards you from financial liability. It also enables you to develop the fiscal discipline of handling your business funds separately from your personal finances. In short, getting clear helps you make reasonable financial decisions (in business and life). And in the end, you develop good credit.
Author bio: As an account executive, Michael Hollis has funded millions by using alternative funding solutions. His experience and extensive knowledge of the industry has become a true asset for First American Merchant, the No.1 Merchant cash advance bad creditprovider.