When you're starting any kind of business "from the ground up," it might be necessary to go out and look for a little capital, and that might include filling out some business credit card applications. A work at home mom can find it hard to develop great business ideas without initial cash flow. But, when you're out there looking at various options for short-term or long-term business financing, don't be surprised to find some pretty tough terms related to proving to the lender that you have the ability to pay back your business loan.
Personal and Business Credit
If your business is brand-new, it probably doesn't have a lot of its own credit history. You may not have built up specific credit accounts related to your business name - that's why you're looking for a business credit card in the first place. Don't be surprised if lenders go directly to your personal credit history to assess whether they want to give you money to start up your business. This is particularly true if you don't have any assets, such as a home or vehicles, to put up against your business loan as collateral.
Lenders will routinely look at personal credit for new business owners who haven't yet established their fledgling enterprise. That means that you will benefit a lot from having a good credit score, and from having solid credit history that shows lenders you have what it takes to grow money over the long run and dedicate yourself to repaying what you have borrowed.
Your Personal Credit History
If you haven't borrowed money in the past, you might be surprised to find that this actually counts against you on some business credit card applications. Lenders routinely run a simple credit report for a potential borrower. There are a lot of issues that can come up on this credit report that may stand in the way of your business credit card or loan. Some of them are related to older debts that you have not paid back, or items that you paid late, even years ago. But another problem is simply lack of solid credit history, and if you do not routinely use credit cards or buy items on credit, you might find yourself getting overlooked by a number of lenders who just don't want to invest in anything less than a concrete pattern of credit repayment.
How do business owners get around these kinds of frustrating obstacles? If you have someone who will cosign a loan for you, that can be a potential solution, but those individuals have to know what they are getting involved in, and it's up to you to reassure them that the situation won't end in loan default and complications. You can also shop around and try to find lenders who will take the time to scratch the surface of your credit history, to find that you may be a good risk, after all. Talking to individual lender's reps can sometimes bring a business loan deal closer to fruition. Just don't expect it to be easy if your credit score doesn't reflect a history of paying off debts.
Think about what you are up against before going to the counter for a work at home business loan, and you'll have a better shot at getting success in your corner.
- Home & Business Finances
- How Personal Credit History Affects Business Credit Card Applications
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