How to Get Business Credit Lines With Poor Personal Credit
Finding business credit lines can be difficult if you have poor personal credit. If you have a bad credit history, lenders and banks may not be so forthcoming about giving you a credit line. However, there are strategic methods through which people with poor personal credit can get business credit lines.
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Instructions
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Contact local banks or community lenders instead of large banks, which are more likely to check your business credit score rather than just your personal credit score. Your business credit score is linked to your business tax ID number, not your social security number. Focus on having a separate business credit history. Keep your business credit score high by having zero outstanding balance on credit accounts and a good bill payment history. Make sure that you get a separate tax ID from the IRS. To get business credit, you must register your business with an EIN and maintain a file with more than one credit reporting bureau. When you do this, your personal credit is kept separate from your business credit file.
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Seek specialty lenders who are known to specialize in giving loans to high-risk businesses. These loans carry high rates of interest, but they have the provision to reduce the rate when the business indicates better cash flow and the ability to pay back the debt.
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Make an application to get a Small Business Administration loan; these loans are offered widely to businesses with poor credit, according to ZeroMillion.com, especially if they meet certain requirements
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Apply for credit cards for your business. You can make use of business credit because the transactions you make are not tied to your personal credit score and you are more likely to be approved than you would be for personal credit cards.
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Try to get merchant cash advances or credit if your business is new but is making good credit card sales. Merchants base their cash advances or lines of credit on predicted credit card sales, and if you can meet a specified monthly minimum, you may qualify.
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Ask your family and friends for financial assistance. Usually, since you are on good terms with them, you may not even have to pay interest. However, if you choose this route, make sure that you treat your family or friend investors as you would any business lender and do not take them for granted. Show them your business plan and give them a legal commitment to pay back the debt.
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Tips & Warnings
You can get a tax ID number without incorporating if your business is a sole proprietorship, a partnership or an LLC.
Through home equity loans, you can obtain a high amount of cash at low interest rates, not to mention tax advantages that are not available with other types of loans. However, home equity loans entail high risk if used to fund a business. So use them carefully, because if the business goes down, both your business and home are at risk.
