Restoring Business Credit
No matter how you try to avoid it, sometimes unforeseen circumstances can affect your business and lead to financial decisions that result in late payments that have a negative impact on your business credit profile. Some companies experience such severe financial distress that they are forced to file bankruptcy.
Once you resolve the issues that caused the negative impact to your business, you can start down the path to repairing the damage to your business credit profile. Even if you have a less than perfect business credit report, you can still obtain business credit while taking steps to strengthen your business; it will just cost you more to get it.
The Effects of Negative Business Experiences on Your Personal Credit
When dealing with personal credit issues, negative items such as a judgment or lien remain on your personal credit report for seven years, and bankruptcies stay on for up to ten years. Even if the bankruptcy is discharged, it does not delete the bankruptcy or the negative payment history that led up to the bankruptcy from your credit report. Once a bankruptcy has been discharged, each discharged debt reports a balance of zero, but the history of delinquency remains.
If you are the sole proprietor of a business, there is no separation from your personal credit history or your business credit history. As a result, when a sole proprietor has accumulated overwhelming business debt, he faces several choices when considering bankruptcy. Chapter 7 bankruptcies can provide a fresh start by liquidating all personal and business assets to pay creditors as much of the money that is owed to them as possible and then discharging the remaining balances on all accounts. With Chapter 13 bankruptcies, the business owner is given the opportunity to use both his future personal and business income to repay his outstanding debts in part or in full, over the next three to five years. There is even a Chapter 12 bankruptcy that provides a simplified repayment option designed especially for family farmers.
Unfortunately, no matter what bankruptcy option you file, time is the only way to remove the negative credit history that caused the bankruptcy. Ten years is a long time to wait for this information to drop off your credit report, so serious consideration should be given if you are considering declaring bankruptcy.
It is important to realize that re-establishing a positive business credit profile is not an easy or quick process. You must be prepared to work diligently to recover from significant financial troubles, including repairing any damages to your business credit report. Take advantage of opportunities to repay any existing debt through a business debt consolidation program if applicable. Analyze and make adjustments to any existing business-related issues that contributed to the financial troubles in order to implement long-term solutions. Finally, take the necessary steps to begin to re-establish your positive business credit profile by establishing secured business credit cards, but be careful when choosing these types of cards.
