It is best to choose your business partner, just as you would your spouse – or so they say. You’ll spend more hours in the office working with your business partner, than you will likely spend at home caring for your spouse. Therefore, you want to make sure that you have someone who you can openly communicate with, shares the same passions, has a great work ethic, and has a great level of experience and expertise in the industry.
However, just as people often forget to ask their partner about their past credit issues, most business owners fail to learn more about their partner’s ability to manage money. One overlooked question that should be asked before choosing a partner is, ‘Are they fiscally responsible and creditworthy’?
Credit Scores Reflect One’s Ability to Manage Finances
Let’s face it; one of the biggest parts of running a business successfully is having the ability to manage finances. While your partner might talk a good game, their credit history can really reveal a lot about how they manage finances. If your partner can accurately manage their own finances, what makes you think they’ll be any better at handling the company’s? A poor credit history shows that they do not know how to manage money, budget, save, or make timely payments.
Good Credit = Company Growth
When you and your partner have great credit scores it opens the doors for various lucrative opportunities for your business. One of the main opportunities includes the ability to secure various means of financing that will help you to develop, expand, and grow your business a lot faster than trying to secure the funds on your own.
Taking Steps to Rectify the Matter
Al-right, so let’s say your business partner, aside from their poor credit history, seems to have what it takes to help you run this business. You’re going to need to be proactive in taking steps that will help your business in the long run. Such steps might include:
- Transfer of Ownership
- Establish Business Credit
- Start a Personal Credit Recovery Plan
Transfer of Ownership
This step should not be done without the help and advice of a business attorney and accountant. However, if you and your partner currently have a 50/50 stake in the business, you can simply allow your partner to transfer 100 percent of the business over to you. This will help you while applying for lines of credit and allow your partner time to boost their credit history. Once they have improved their credit score, you can then transfer their part of the business back to them.
Establish Business Credit
If you have an established business and are looking for financing options as a means to expand, you can always opt to establish business credit. There are various lending providers out there that are willing to offer your business credit based on the history of financial success your company has. If you’re going to go this route however, it is imperative that you maintain a good payment history.
Start a Personal Credit Recovery Plan
Lastly, before you apply for any type of funding, your partner can come up with a personal credit recovery plan. They can utilize financial services such as debt consolidation, and even credit repair services for discrepancies.
Credit Repair Tip:
If your partner is going to take this route, it is ideal that they take the time to research each company before working with them. For example, looking up credit repair services from a law firm would require your partner to look up and read legal firm testimonials.
No one ever links their personal credit history with business lending opportunities until they get rejected. Be proactive in talking with your partner about the various options there are and determine which one makes the most sense for your business and its continued growth.