Can’t Get a Business Loan? How to Rebuild Your Credit Rating
Most of the time, new startups need some type of funding in order to be successful. Although in a few instances and certain industries it may be possible to start a business without a great deal of money, for the most part it’s important to have enough to cover most of your startup’s initial expenses as well as cover expenses for the coming few weeks or months. Because of this, many entrepreneurs tend to borrow funding, whether from an investor, friends or family, or the bank. With bank loans being the most popular for business, it’s no wonder that, often, entrepreneurs who have a poor credit rating are left at a loss of what to do when they cannot obtain funding from the bank. Here’s how to rebuild and improve your credit rating in order to get that all-important business funding.
When starting out rebuilding your credit rating, the first thing that you will need to do is pay off all or at least as much as possible of your existing debts. Once you have paid off a debt you will no longer be able to miss any payments on that line of credit, therefore it cannot be used against you when it comes to your credit file. However, for many entrepreneurs it’s not easy to simply pay off current lines of credit, which is where a debt consolidation loan comes into play. By paying off all of your debt with one separate loan, you can reduce your monthly repayment significantly and improve your credit rating. See ukhomeandpersonalloans.co.uk for more information.
If you are struggling to make repayments for one or more lines of credit, it’s important to come to an agreement with your creditors. By doing this, it’ll be less of a struggle to keep up with repayments and by changing the terms of your repayment and coming to a new agreement, you will cause less damage to your credit rating. The majority of the time, creditors are very understanding when a lender’s circumstances change and will usually work with you to come to a mutual understanding that is beneficial for both parties involved. Rather than ignore your creditor’s calls, get in touch with them yourself and tell them about the situation so that they can give you help and support for example by reducing your monthly repayment amount or offering a reduced settlement fee.
It is not advised to take out any further lines of credit until you have dealt with your existing debts. If you are already struggling with current debt, adding more to the mix will not do your credit rating – or your pocket – any favours in the long run. Instead, wait until you have paid off and cleared all of your existing debt before taking out any further credit in order to rebuild your credit rating. A small line of credit – such as a credit card with a small limit or even a mobile phone contract – will often suffice.
Having good credit is essential to being offered a business loan!