Personal Credit: It really does matter
by Business Money Today - August 3, 2009
It seems that the economic decline is ending. That means the economy, barring any unfortunate event, should start climbing. As the economy climbs, consumer and business spending will pick up creating more business for your company.
Having said all that, most small businesses are not in the position to take advantage of this new demand. Reduced revenue, lack of access to credit and an overall sour economy has left many business owners strapped for cash - even for simple expenses like payroll, inventory or marketing.
Thus, for these businesses to get back on their feet and meet this new demand head on, they will have to seeking overall working capital, asset based loans or project financing from banks and other lenders.
The banks and other financial organization know this. They know the economy is turning and they know that there are opportunities for them to increase their revenue through lending - it is their business after all.
So, we have businesses seeking capital on one side and banks willing to make loans on the other - sounds like a match made in heaven.
But, not only has the recent economic decline hurt small business sales and revenue it has also hurt the personal credit scores of these entrepreneurs.
Given the recent debacle in the financial markets regarding risky lending and subprime borrowing - banks will no longer look the other when it comes to personal credit scores.
When the SBA (as part of the American Recovery and Reinvestment Act of 2009) revamped their programs and fees structure in hopes of promoting new small business lending, these new programs never really panned out. Borrowers blamed banks and other financial organizations. The SBA blamed the bad economy. But, the banks (and other capital provides) continually stated the facts. They just were not seeing creditworthy borrowers. Personal credit scores were in the toilet, collateral values were sinking like rocks in a calm pond and income (repayment ability) was non-existent.
Given this potential future return to a more stabilized economy, two of the three issued stated by banks should automatically correct themselves. As demand increase and business find lucrative new opportunities, collateral values and income should rise - a rising tide (the economy) floats all boats.
That leaves personal credit histories. An improving economy (increasing consumer spending) will in no way help improve personal credit scores. And, as most of you know, lenders look at credit first. If your credit is sub-par, they will walk right away regardless of the strength of the rest of your deal.
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If you want to prosper in this new, rising economy (as it improves and well into the future) - to take advantage of the huge spending potential that is staring us in the face - you must (repeat must) have good to excellent personal credit scores.
There is only one real way to fix your credit and that is to set your mind on fixing it. It is up to you. You have to work at and set it as a priority. Once completed, you will not believe the number of doors that open up to your company. Not, just bank lending but customers, suppliers and vendors will also look into your credit before doing business with you.
Need information on how to go about improving your personal credit scores with out falling victim to the numerous scam artists out there, visit the Federal Trade Commission's website for unbiased advice and guidance.
Other items to consider:
Consolidating Unsecured Debt
Establishing Credit
Repairing and Rebuilding Your Credit
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Personal Credit: It really does matter - Business Money Today