Good Credit Unlocks the Doors of Opportunity

Having good credit and sound work experience are the keys to small business opportunities and keeping all of your franchise doors open. The very first thing a prospective franchisee should consider when investigating a franchise business opportunity is the ability to borrow money. Having good credit is most often the most important element of whether or not an individual will be able to borrow money. Most prospective franchisees look to a small business lender as the first and easiest source of franchise financing. In addition to one’s personal credit, a small business lender also looks at the franchise itself to determine the credit-worthiness of the franchise.

If you are investing in a sound, experienced, and proven franchise, your personal credit will determine whether or not you will get financing. Lenders look at personal bankruptcies, tax liens, and judgments to determine your credit. In addition, a lender looks at the business experience that the borrower brings to the table. It is a lot easier for a person in their 30’s or 40’s with a decade or more of sound business experience to get a loan than a 20-year old with no experience. Even a good, clean track record of working for 3-5 years and getting a promotion or two will help you qualify for small business financing.

Credit Advice for Young Would-Be Entrepreneurs
Having a good credit score is essential if one is to be successful in securing financing and purchasing a franchise. If you are a young adult just out of school, it might be a good idea to get a nice paying, secure job with a large corporation and also apply for a credit card or two. It is essential that you learn how to manage money and being successful at money management can be as simple as making sure to pay off the balance of your credit card every month. Do not make the mistake of thinking you can only pay the minimum required amount because you might be faced with an increasing balance which can quickly grow out of control. Remember that your first few years of owning a credit card is only to establish your credit so make sure you can pay the balance in full every month. If you do that and build an employment history, your credit score will skyrocket and you will qualify for a small business loan within four years. You spent four years building your education, now you need to spend four years building your credit.

Repairing Bad Credit
If you have bad credit there is no quick fix to restore it back to a good score. It will take time, sometimes years, to execute the necessary steps to get back into the good graces of lenders. The first thing you should do is to get a copy of your credit history to see where it needs to be repaired or improved. Check your credit report for errors. You can dispute any errors by simply calling your credit bureau. The next step is to put yourself on a plan to repay any legitimate unpaid balances with your creditors. Even something as insignificant as a $100 unpaid garbage pickup balance will not go away and it must be repaid. If you can, pay the bill in full or arrange a payment schedule with the company to whom you owe money. After that, if you have a large credit card balance, stop using your credit card. Instead, set up to have money sent to your credit card company every month automatically by your bank so that you don’t have to go through the decision as to whether or not you will pay and how much. Have your checking account debited automatically so your bills will be that much easier to pay.

An excellent work track record, paying your unpaid debts, and paying down your credit card balance to zero will position yourself to approach the SBA with confidence when you look to secure a loan to purchase a franchise.