Karla De Leon is Main Street Launch’s Lead Business Advisor. She offers tips and advice to entrepreneurs to help them start and grow their small businesses. This tip is about how lending circles can support a small business owner who wants to establish or improve credit.
As a business owner, making sure you are credit-worthy is an important part of your success as an entrepreneur. You never know when you might need funding for your business, so it’s always good to be prepared. If you suddenly get a large contract and don’t have funds to fill that order, a loan might help get you get the contract and fulfill the order, leading to more business down the road. You don’t want to be held back by bad personal credit or be stuck with an extremely high interest loan that destroys your cash flow. Non-profit lenders like Main Street Launch are great for businesses owners with less-than-stellar credit looking for a business loan, but strengthening your personal credit is paramount when looking for a business financing to grow your business.
Because of the need to help clients build and strengthen their credit profiles, as well as provide a financing option for those looking for funding under $10,000, Main Street Launch became a Lending Circle provider in 2015. Through our partnership with Mission Asset Fund, we can facilitate Lending Circles in Oakland. A Lending Circle is a zero-interest, social loan that helps you build credit, save money, and access a small loan.
In a Lending Circle, you’re borrowing from someone in the group, but you’re also lending. A group of people come together (with Main Street Launch facilitating) and make a monthly payment from $50-$200 per month. This amount is automatically debited from your bank account each month, so you don’t have to worry about making a payment on time. Every member of the circle receives the full pot of money (deposited directly into their bank account) once in the rotation until everyone has received the full amount.
The benefit is more than just the amount of money you receive. Each of these monthly contributions appear as payments to a term loan on your credit report. This reporting helps establish credit and strengthen credit, regardless of the size of the monthly payment. It shows lenders that you can make regular monthly payments and fulfill your debt obligations.
This is a great option for business owners looking to improve their personal credit, those looking to save for the future, or those who just need a little extra cash up front.
You might think your personal credit and no connection to your business, but in this day and age your personal credit can affect your ability to get financing for your business. Keeping your personal credit in check can benefit your business. Every little bit you can do to boost your personal credit is a good idea for you and your business.