Credit Scores and Looking for
Business Loan
As has been one of the topics
discussed throughout this website, credit scores are extremely important when
applying for business loan. With lending standards tightening among all banks
and financial institutions, it is imperative that you have a credit score that
implies that you are a worthy credit risk. A credit score is calculated based on
a number of factors including your past payment history, your current debts, how
long you have had credit, and whether or not you have any delinquent accounts.
Today, most lenders want to see a credit score above 680 if they are going to
grant you a business loan.
When looking for business loan,
you should pull all three of your credit reports from the three major credit
bureaus (Equifax, Trans Union, and Experian). Each bureau maintains its own
records so it is important to ensure that the information on each of your
reports is correct. Most banks now look at all three different reports to make
sure that there are no discrepancies.
If your current credit is not
in a good state then you may want to talk to your accountant or a properly
licensed credit counselor before applying for a business loan. They will be able
to assist you in making appropriate decisions regarding how you can improve your
credit score so that when you do apply for a business loan – you will have no
issues pertaining to your credit.
As we have discussed earlier,
if you have an outstanding business project that needs financing but you do not
have an appropriate credit score then you may want to seek alternative methods
of finance. This can include bootstrapping your business or seeking equity
investments from private investors. You may also want to go to familiar sources
such as family and friends as potential lenders/investors in your business
venture.