Many small businesses struggle with a challenged credit history or with having any credit history at all, especially when they are just starting out. In the beginning, your business finances, personal finances, and your credit may be intertwined more than you would like. Because of this, your business credit history and your own personal credit can affect the chance of your business getting a loan.
If your credit is not necessarily bad, but just a bit below prime, it may seem that the possibility of being approved for a small business loan is out of the question. However, that is not always the case. There are several options beyond a traditional bank loan that could work. If you need financial assistance sooner rather than later, you could try one of these avenues: online loans (just be careful of high-interest rates), short term loans, collateralized loans or small business loan programs like the SBA Community Advantage Loan Program. The Community Advantage loan program helps review government assisted loan requests in order to increase access to credit for small businesses.
Factors that can lower your credit score
If you’re concerned about your credit score, it’s best to learn some things you may be doing that is contributing to your score becoming less than ideal. According to one report, these are some common mistakes people make that are affecting their credit scores:
- Paying your bills late – 35% of your FICO score is based on your payment history.
- Not paying the minimum amount due on your account – this leads to past due reports, as well as late fees, usually at high-interest rates.
- Keeping high debt levels – this raises a flag with lenders about your ability to repay your debt.
- Having several different credit accounts – too many cards can equal too much credit, making lenders suspicious of your ability to repay your loan.
These factors can contribute to you just missing getting approved for an SBA loan. Looking through your financial habits and bookkeeping, it’s important to truly recognize if you are making any of the above mistakes and try to change that pattern. Changing these habits can help raise your credit score as well as help your business start making progress. If you are looking to secure a loan, showing lenders that you are attempting to improve your credit score and pay off current debt is a smart way to begin the process.
Improving Your Credit Score
Improving your credit score may seem simple on paper: pay your bills on time, make consistent payments each month, and lower your debt. But if you feel like you’re underwater financially, these tasks are easier said than done. Seeking assistance from organizations such as the National Foundation of Credit Counseling (NFCC) or Consumer Credit Counseling Services can teach you how to manage your debt. Working with an agency to get your debt under control will improve your credit score in time. As your debt decreases, your score will increase and so will your chances of getting a loan for your business.
Get on the road to securing an SBA loan today
Find out more about the Community Advantage Loan Program at Growth Capital. We can help answer any questions you might have and get you on the right track to getting the best loan for your small business needs.
Contact our loan experts today at (216) 592-2332 or online.
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