Credit scores can rise and fall as fast as temperatures during hurricane season.
One day you check your scores and you’re fine, and the next time you apply for a loan, you discover that you only qualify for the highest interest rates.
Business owners are particularly susceptible to the ebb and flow of their credit situation. Because business profits fluctuate according to the whims of the market, you could find yourself in dire credit straights in a matter of months.
As the following article looks at, there at least 5 ways your good credit can go bad.
Following is one common scenario that can happen to even the best small business owners…
Future Receipts Loan
Future receipts loans are a kind of business advance where you can get a certain amount of cash now in exchange for future sales. This loan is based on proof of past credit card sales. Your business is expected to perform in the near future as it has during the past, which is a reasonable assumption.
If you’re strapped for cash and perhaps looking to expand your business or need to make repairs to equipment, a future receipts loan can be a smart move. The problem arises when your business suddenly doesn’t perform as it has in the past, and those credit receipts don’t come in as expected.
Now here you are with an outstanding loan, with no way to pay it back. In addition, your regular business expenses are getting the best of you because of the unexpected downturn in profits.
Instead of feeling guilty or foolish, take immediate action before your credit score is impacted.
Collateral Loan Solution
One solution is to apply for a traditional collateral loan secured with one or more business assets. A collateral loan typically will have a lower interest rate since the loan is secured. With the money you receive from the collateral loan, you can pay off the future receipts loan you got, thereby keeping your credit score safe.
In the meantime, if you have to take cash advances on a business credit card in order to cover overhead expenses until business picks up again, you still can.
Don’t feel bad about having to weather through a financial storm.
There’s nothing wrong about borrowing money to expand or repair needed equipment. The trick is to face the problem head on and take care of it as soon as you can.
As long as you do that, your credit and your business reputation will be in good standing.
About the Author: Kate Supino writes extensively about best business practices.
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