What To Do When a Business Partner Has Bad Credit

This post was originally published on On Deck

Around 28% of Americans have fair or poor credit — so it’s not uncommon for someone to have less-than-perfect credit. However, a business partner with bad credit can present some challenges to your small business. It can make it more difficult to do things such as secure financing from lenders and open new business tradelines with vendors.

Navigating these hurdles can strain your business and your relationship with your business partner. So what can you do when your business partner has bad credit?

Let’s explore what some of the options are and how you can be proactive about protecting your business and personal finances.

What to Consider if Business Partner Has Bad Credit Transfer ownership or adjust ownership percentages

One solution might be to restructure the ownership arrangements within your business. Most financial institutions require information from anyone who owns 20% or more of the business. So when you apply for business funding, your business partners’ credit may mean you won’t get approved.

Your business partner might consider selling their ownership to you or another trusted person (such as a third partner). You may also be able to make your business partner an employee (or contractor) instead of an owner,

Read the rest of this post, which was originally published on On Deck.

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