For those of us with an entrepreneurial mind, planning a new business can be one of the most exciting times in our lives. However, big dreams and exciting plans usually require financial backing and most of us don’t have a pot of gold. The financial side of setting up a business can be made even more difficult if you have had a tumultuous relationship with money in the past. A poor credit score can seriously hinder those dreams of entrepreneurship. Luckily, we have put our years of experience into action to bring you our top tips on how to improve your credit score when starting your own business.
1) Play the long game
Unfortunately, a truly bad credit score isn’t fixable overnight. If you have ever gone through bankruptcy or defaulted on a number of credit card or loan payments, those will remain on your credit history for a number of years. Your credit history is a report of any lending in your financial history and your credit score tells banks and other loan providers how likely it is that you’ll be a good borrower. If you have a poor credit score, try to be patient. Don’t continuously attempt to access credit as this will worsen the situation.
2) Start small
There are many lending options for those with a poor credit score. You won’t be able to access a huge amount of credit or low-interest rates, however, by accessing smaller lending options you will begin to build a credit score. Begin with a poor-credit credit card, borrowing small sums each month and paying in full each month. After a few months, consider taking out a small loan of a few thousand pounds with a trusted bank. Again make sure to pay this back on time and in full. These steps will build your credit score and help you convince the bank to give you larger business loans in the future.
3) Consider non-traditional lending
Luckily, the twenty-first century is a wonderful time for future business owners. With crowdfunding, co-operatives and other young entrepreneurs looking to help prospective new business owners, there are many options which don’t require a business loan. Research these and consider how they could work for your business.
How to improve your credit score – where to find out more
If you’re starting a new business and need help with finance for asset purchase or cashflow – get in touch to discuss how we can help. Or you can read about the alternative forms of finance we can provide here.