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Do you need to have an excellent credit to start your own business?

Did you know that when Richard Branson first started Virgin Records, his credit score was not in perfect shape? As a result, he didn’t borrow against a business loan, but instead used his personal savings, borrowed from family and friends, and lived on a shoestring budget for many difficult months.

In fact, he is not alone in this respect. Many entrepreneurs start off with nothing and many do not have a good enough credit score to take to the bank. Some of the best business ideas have been born not from a business loan, but from sheer guts, determination and of course a natural entrepreneurial flair.

If you are just about to start a business and you have a poor credit history or your credit history is non-existent, these tips should help. 

1. Check the credit scores on the doors

Do you have any idea what state your credit record is in? If you don’t then you could be wasting your time by approaching your bank or another source of lending for assistance. By checking your credit score at you can get a good idea of how likely it is you will be accepted for credit and start doing some serious business planning.  

2. Banks are not always the best source of funding

If you have a poor or even an average credit history, your high street bank may not be the best place to go for a business loan. Years ago, the banks would use the 4 Cs of lending: cash flows, credit history, collateral and character. Sadly, this is no longer the case and instead, most banks will rely just on your credit history in order to make a decision.

Thanks to advances in technology and the information about you that is available, banks can run a credit check in seconds and give you a decision in moments. No matter how good your business idea, if your credit history doesn’t deliver, there is little chance of your loan application being accepted.

3. Do you have a good business credit score?

If you are already in business, some smaller banks or building societies may consider your business credit score if your personal credit score isn’t so good. For example, if you run a Limited Company and have a good business credit score, you may be able to apply for credit on behalf of your business rather than yourself as an individual.

4. Build up your business credit score

Your business credit score speaks volumes about your business and how it is operated. It can determine whether people choose to trade with you, whether lenders will loan you larger amounts of money and whether you can obtain company credit cards, overdrafts and other smaller lines of business credit.

If you are thinking of starting a business and need financial assistance with setting up, or you are running a business and need additional borrowing, it pays to keep your credit score in good shape so that you have more chance of acceptance and ultimately, business success.

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