How Your Personal Credit Can Torpedo Your Small Business Startup

Personal Credit

Part of the great American mythos is that a person, regardless of who they are and how little they have, can pull themselves up by their bootstraps to become a self-made success story virtually overnight. It is a beautiful dream, as long as you realize that it is just that: a dream. The reality is a lot more harsh.

Two people start with little more than the clothes on their back. One becomes fabulously successful. The other languishes in relative poverty. Most often, the difference is not that the successful person took more risks, was smarter, or more industrious. More often than not, it was due to the fact that the successful person had borrowing power while the other did not.

How you came to be penniless has a lot to do with your chances of reversing your fortune. The truth is you may have an easier time getting a loan if you hit bottom from unwise gambling on the stock market, than if you got there via poor credit decisions. There will always be someone who will finance a gambler, as long as he pays his debts. But few will gamble on financing a debtor.

Repair Your Credit

If you are hoping to become a self-made millionaire, there are couple of things you need to know. First, there is no such thing as a self-made millionaire. They all had help from someone, usually in the form of a business loan. You don’t have to be born with a silver spoon in your mouth. But you are going to have to get to know someone who has the kind of money that you hope to make, and get them to lend you some of it.

Second, you are going to need to repair your credit before you get started with your business aspirations. The good news is that credit repair is possible. It is not easy. But it is definitely possible. There are no secrets to getting it done. The tools are publicly available. But you may be better served to get a professional to help you with the process.

To find a good service, you can go online and look at Yelp reviews. Pay attention to what real people have to say in their customer testimonials. You can get a good feel for what to expect. Just remember, for good or ill, when it comes to testimonials, your mileage may vary. Only after you have done some repair work to your credit should you consider moving forward with your startup. If you don’t, you can expect the following:

High Interest Loans

One of the worst things about having poor credit is the way you are treated by lenders thereafter. The market if filled with sub-prime lenders who will be happy to give you a bad loan. The worst of this bread are known as predatory lenders. They are happy to take advantage of the desperate who have little by way of choice.

Getting a loan from these people means that you will get too little loan, and too much interest and too high of a payment. If a person with good credit and a person with poor credit gets financing for the same vehicle, the person with the poor credit will pay more monthly and overall than the person with good credit, usually, by quite a lot. Such loans are a gamble to the lender. But they are an even bigger gamble for you to take.

You Risk Losing Everything

If you do manage to get a loan, It will likely be tied to any real assets you might have. While an unsecured loan of sufficient size is unlikely, you could possibly get a loan based on your home, property, or insurance policy assuming it is the right kind.

This is one of the most dangerous kinds of loans you can get for a startup. That is because if things do not go well (which is often the fate of startups), then you stand to lose everything. No more college fund. No more retirement. No more roof over your head. You won’t even have a car to live in when the creditors are done with you. Hello, in-laws.

When starting a business, you want to use other people’s money. Venture capitalists and crowdfunding sources are standing by. But a good, solid, small business loan is really what you’re after. And for that, you need a good business plan, and even better credit. There are plenty of professionals willing and able to help you with both.

Mitch Finlay

Web Development Manager

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