It is good to select the best business partner, just as you would your spouse- or so they say. You will spend more time in the office working with your chosen business partner than you will possibly spend at home caring for your spouse.
Therefore, you must make sure that you have a partner who you can openly communicate with, shares similar passions, has an excellent work ethic, and has the best level of experience in the industry.
Nevertheless, just as people usually forget to ask the partner about their previous credit issues, most business owners fail to understand more about their partner’s ability to manage money.
One majorly overlooked question which should be asked before choosing a partner is, “Are they creditworthy and fiscally responsible?”
- Credit Scores of your Business Partner
Let’s be honest, one of the greatest parts of running a successful business is having the ability to manage finances. While you partner may share a lot about themselves, their credit history can actually reveal a lot about their capacity to manage finances.
If your partner can’t properly manage their finances, what can make you trust they will be any better at handling the company? A bad credit history proves that they don’t know how to manage money, save, budget or make timely payments.
- Good Credit increases the Company Growth
When you and your business partner have the best credit scores, it creates different lucrative opportunities for your business.
One of the major opportunities includes the capability to secure various means of financing which will assist you to develop and expand your business faster than trying to secure the funds privately.
Three Major Steps to Correct the Issue
Now let’s say your partner, apart from their poor credit history, seems to have what it takes to assist you to run this business. You need to be proactive in taking steps which assist your business in the long run. Such steps are:
- Transfer of Ownership
This step shouldn’t be done without the assistance or advice of an accountant and a business attorney. Nevertheless, if you and your partner presently have an equal stake in the business, then you can just allow your partner to transfer the total stake over to you.
This will assist you when applying for lines of credit and offer enough time to your partner to improve their credit history. Once they have boosted their credit score, you can then transfer their stake of the business back to them.
- Establish Business Credit
If you have an established company and you are looking for financial choices as a means of business expansion, you can always decide to establish business credit.
There are different lending providers out there who are more than willing to provide credit for your company depending on the history of financial success your business/company has.
However, if you are going to choose this option, it is paramount that you maintain a good payment history.
- Develop Personal Credit Recovery Plan
Before you apply for any source of funding, your partner can develop a personal recovery plan. They can use financial services like debt consolidation, and even credit repair service in case of any discrepancies.
Sourced from: businessblogshub
Photo: Thinkstock/BernardaSv
