There are countless small business owners today that operate their business and are experiencing bad credit issues. A big percentage of these business owners are susceptible to failure if they do not get control of their credit history and the many financial problems that often develop when operating a company with bad credit. The most common reason for any small business failing is undercapitalization, and bad credit is generally responsible for that lack of capital. Bad credit is an important critical issue, especially for small business owners and there are several steps to take to improve your credit standing and increase your chances of succeeding in the business world.
The first and most important step is to get a hold on your current credit situation to stop the bleeding. Small business owners have to understand that all bad credit has a shelf life, usually no longer than seven years, and you always will have another opportunity to be in good credit standing once again. In order to get a hold of your exact credit situation you have to pull a credit report from all three major reporting agencies. Luckily there is a new law in place that allows everybody to receive a free credit report from all three agencies here. Once you have your current reports you can begin the healing process.
Removing any unnecessary or incorrect information is the most important step. Unnecessary information is usually derogatory items that are outdated and have passed their shelf life. Often this information can simply be removed by calling the credit report agencies and requesting their removal. You will also have the easy internet option to challenge those items online if you are familiar with navigating the web. Either way, you can improve your credit score dramatically by getting those items removed.
There is also the possibility that some negative items are reported in error. These items may be incorrect amounts that you owe or improperly dated information that can be challenged and may result in some improvement to the account listing and sometimes even a complete removal. Taking these initial steps of removing unnecessary or incorrect information allows you to begin increasing your credit score and start the process of recovery.
The next step is to reach out to creditors that you do owe money and request a settlement that contains authorized paperwork from the company to help request that the item be removed from your history at the credit reporting agency. Some money in hand is always better than debt and many of these creditors are more than willing to settle at a significantly reduced price. They are well aware that it is only a matter of time before the items are removed from your credit anyway so you generally can have huge success taking this route.
Once you have removed every derogatory item that you possibly can it is just a matter of time before the rest falls off. The next step is to begin managing your existing credit and at the same time limit your exposure to undercapitalization. If you are in a position where you cannot manage your current expenses a bad credit business loan can be a great solution. Many alternative lenders offer small business loans to existing business owners that have bad credit. Qualifying is relatively quick and most of these lenders allow the entire process to be completed online. It is important that you only borrow enough to manage your expenses so that there is enough capital to operate your business and at the same time pay back the loan. You will not only put all of your existing accounts in good standing and make your business operate more efficiently, but you can further improve your credit score by paying off the loan. Acquiring a bad credit business loan is a great way to get your existing credit accounts up to date to maintain positive input on your credit report, and at the same time improve your chances of success by effectively reducing the risk of your business failing due to undercapitalization.
Managing a small business with bad credit is a risky proposition that can often result in failure. Taking a few simple steps will allow you to improve your credit history and at the same time get a hold of your current expenses and your overall business. As long as you are proactive and utilize the above mentioned tips you have a great opportunity to manage your business through the bad credit times.