How To Escape The Bad Credit Trap And Build Your Small Business

November 23, 2014

8:00 am

Investors and small business owners are involved in a never-ending struggle to maintain a steady flow of cash. However, this is not easy to do when bills are piling up at a faster rate than sales can be closed. Yet running out of operating capital is not an option because it can cripple any aspiring company.

Financial problems are further aggravated when the company also has a poor credit score. Moreover, unless it is repaired, it can be almost impossible to finance projects because it will be hard to borrow money from banks and credit unions.

Banks Risk-Averse

Although the economy has been improving over the past few years, it is still difficult to get a business loan. This is particularly true for a company that has some blemishes in its credit history. Most banks and credit unions are unwilling to give a small business owner a loan if their credit scores are below average.

The Trap

Ironically, banks are not willing to admit that a company may have valid reasons for a poor credit score. After the financial crisis in 2008, there was an economic downturn for the next two years, which was dubbed by financial journalists as the Great Recession. At that time, numerous small businesses ran into cash flow problems and fell behind in paying suppliers. The result of these defaults was a reduction in the company’s credit score. In some cases, it may take years to erase these records even if the debt was eventually paid in full.

The Escape

Although many small business owners may have fallen into the “bad credit” trap, there are two routes to escape it. The first route is to get help from a professional credit repair company. Credit repair from, for example, yields a free credit report summary and consultation. The second route is to learn how the entire credit system works and repair the damage over time.

3 Credit Repair Strategies

When trying to repair credit scores, here are three proven strategies:

1] Business efficiency. Lenders want reassurance that they are not taking an unnecessary risk when loaning money. Consequently, they look at routine and rudimentary business behavior. They look at the numbers to see if the business is profitable, if bills are paid on time, if staff numbers are reduced during the slow season, and if the inventory is kept at a reasonable level.

2] Timely bill payment. Late payments, missed payments, or no payments have a negative impact on credit scores. Bills need to be paid in full and on time so that new credit behavior covers past mistakes. Still, if an account went into collection in the past, it may take as long as 7 years to clear.

3] Commingling accounts. When a business owner pays for his or her personal expenses with the company’s credit card or pays for business expenses with a personal credit card, it can be difficult to keep track of transactions and establish a positive business financial record.


A small business needs good cash flow to stay in business and high credit scores to borrow money to expand its business. When credit scores are damaged, they can still be repaired. This can be done by either getting the help of a well-established professional credit repair company or learning how to immediately improve business fiscal processes to eventually show a good credit history.


Did you like this article?

Get more delivered to your inbox just like it!

Sorry about that. Try these articles instead!

Social Media Junkie and Strategist, Internet Marketer and Tech Savy. I have helped many companies to create buzz, so that their branding dominates all social and marketing mediums in their niche. Also a Film Enthusiast & Aspire to be a Film Maker sooner or later.By the way I love to argue.

Leave a Reply

  • (will not be published)