How Bad Credit Affects Your Business

October 21, 2011 by  Filed under: Credit 

Every business works on capital. The give and take of money, funds, and investments are a part of every business. A business cannot operate without capital. This give and take is the essence of a business. In a business the entrepreneur many times need loan to expand his/her business or to complete a consignment. When the business organization borrows any money it has to prove its credit worthiness in the market. The credibility of the entrepreneur does not count here because the money is borrowed for business so the business credit comes in to picture. If the organization does not have a good credit history then there would be many problems.

Effect of bad business credit:
1. The capital procurement becomes very difficult with bad financial history. If the organization does not have a good financial history and needs loan for its business the banks or financial institutions would not accept its loan application. In such cases, private money lenders are the only choice and borrowing from them would mean shelling out more money as interest to these lenders.

2. At the time of M&A’s dissolving assets, partnership, the credit worthiness of the organization and its market value is judged. Based on this, the buyers decide whether buying an organization or getting in to a partnership is profitable. If the organization is under debts and has a history of not repaying debts its market value would be hampered.

3. Business runs on credit from suppliers. Everything is not paid in cash at that very moment. The business needs many different sorts of materials and support services like transport, packaging, etc. All this cannot be paid for at that very moment. The businessmen get a tenure within which they can pay the supplier. This tenure can be increased or reduced depending on the past history of the organization. If in the past the organization has failed to make payments or delayed its repayments, the lender might revise the credit period clauses or even deny giving credit. This would again pose a big problem for the entrepreneur.

Thus, bad business credit would not let your business flourish. It would hamper the progress of your business, its reputation in the market and its overall growth. However, if you are on the verge of getting a bad credit score resort to credit repair measures to overcome the same and take your business to new heights. Do not let it affect your business.

Chris Rodac is an expert, who provides advise to improve your credit score.He has also good ideas on personal credit and business credit.

Article Source:
http://EzineArticles.com/?expert=Chris_Rodac

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