Having an excellent credit rating is relevant in all sorts of contexts, and running a business is definitely one of them.
To go into this further, we’ll outline why a well-rounded credit history is relevant to entrepreneurial success, and what you can do to keep tabs on your score over time.
Borrowing becomes more affordable
Every business will require funding throughout its history, and new enterprises often turn to traditional lenders in order to drum up the initial capital required to jump start their operations.
With a good credit score, you’ll be able to access the most favorable loans, including those with low rates of interest and a raft of other perks.
Budget management gets easier
If you’ve got a good credit score, it’s a signal that your money management capabilities are on-point. In turn this bodes well for the financial health of your business as a whole.
Conversely if you’re not tuned in to how your credit score is holding up, this suggests that you’re lacking one of the fundamental assets that all entrepreneurs need, which is attention to detail.
Ownership dilution will not be an issue
Poor credit might preclude you from using business loans to build your latest idea into a workable organization, and thus force you to seek outside investment, which inevitably leads to handing over ownership of some or all of your fledgling firm.
On the other hand, with good credit and the option to borrow funds for your startup, you won’t need to dilute the ownership whatsoever, and can retain total control of your pet project.
How to easily check your credit score
The good news is that it’s easy to check your credit score online, and you can track it instantly from any modern device, whether that’s a desktop PC or a smartphone.
The sooner you start doing this, the better you will become at keeping your finances on an even keel. This applies to both your personal and your business money-matters. Because of course you need to remember that your business will have its own credit score assigned to it once it is up and running.
What impacts your credit score
Simply put, your credit score is based on factors including your repayment history and the current scale of your debt burden.
If you repay loans and pay down credit cards on time and in line with the agreement you’ve got with a lender, your score will improve and you’ll maintain it at a higher level.
If you miss payments, go over your credit limit, and accumulate large sums of debt, it will fall. You can also have credit score issues if you apply for credit frequently.
It’s a priority for business owners to get their credit in good order, both to help their companies to grow smoothly, and to ensure their personal finances are not unbalanced for any reason.
A good credit score will be particularly valuable if you suddenly need to secure a loan quickly and affordably, whether to cover one-off costs or to fund the next stage of your business’s expansion. You’ll be able to get any borrowing approved, and avoid steep interest costs, without delays and with the widest choice of potential lenders.
If you check your credit score and understand what it means, you won’t need to spend sleepless nights worrying about how money is impacting your business. So don’t delay in getting into this habit, or in changing your finances so that your score improves with each passing week.