All micro-businesses know how difficult it can be to achieve the state of success they’d wish for their firms especially when funding is inadequate. And regardless of your source of financial backing— whether from conventional banks, an alternative lender, or an angel investor— it is essential that your credit remains rock solid.
According to a survey by Nav, the financial firm supporting thousands of micro-businesses, 26% of retailers shy away from hiring staff and implementing expansion strategies due to financial challenges.
Discover some credit struggles below and eliminate the barrier that may be blocking you from achieving your funding goals.
1-No Credit History
Unlike personal credit that you don’t need extra effort to establish, building business credit requires that you take proper steps to make sure all your company’s transactions are part of your business credit history— or you miss the chance to boost your credit score.
2- Scanty Knowledge about Credit Scores
Until you understand how credit scores work, credit opportunities will keep passing you by. Most retailers don’t know they can still get funding even with a score of 180— different entities and vendors have their models. For instance, scoring 160 on the FICO SBSS model may earn you credit with banks like RBC, USBank, and PNC.
Get familiar with business credit score models before you seek new credit so that you know what options you have before ruling yourself out as unworthy—remember; getting a merchant account with bad credit is possible.
3-Poor Business Registration
Is your business on your state’s registry, or will your potential credit providers spot it on the list of outdated companies? Insufficient registration details hinder the process of establishing credit history which will essential for future business expansion. And for those running multiple small businesses, be sure to register each entity separately.
4-Funding your businesses with your Personal Credit
When starting off, it makes sense to tap into your personal credit card to pay for stuff like office supplies, purchase inventory or book a plane ticket. But credit experts advise that you should take advantage of the card offers that roll in when your firm is up and running. Shifting to business credit and seeking out more of such offers is the only way to establish credit for your starting business.
5-Failing to benefit from Credit Card Perks
On top of building your firm’s credit history, Business cards are a perfect way to get cash back, save some money and get free airplane miles. The more your company utilizes and pays back credit, the more perks you’ll get on your new business card. Don’t hesitate, compare deals and to grab new cards so that you can take advantage of perks. These extra dollars can prove useful in times of financial constraints.
As you can see, it is crucial that you learn more about credit so that you do not suffer when you company is pressed for finances.