|Building Business Credit|
Most startup businesses encounter difficulty when seeking approval for business loans from banks. This should not surprise to anyone as lenders are often stricter because they dislike the idea of getting higher exposure to risks. It is not impossible to get sought-after approval for loan applications but it may take time and it may be too tedious for any business owner.
Building business credit is one way to make it easier for any business to seek approval for bank loans. Lenders run credit investigations before approving loans and that is where the process stalls. If your venture has a reliable business credit, you can be sure you can access financing anytime you need it.
Funding Instantly shares effective ways for building business credit. If you want to avoid being rejected when applying for a loan from any lender, here are helpful tips that can serve as your guide.
1. Improve your personal credit score.
Lenders will look at the personal credit rating of the business owner. That is highly possible if the venture is a startup or if it lacks its own business credit. Thus, before approaching any loan provider for a business loan, be sure you have a good credit history. Lenders will always be mindful of any borrower’s reputation and credibility especially when it comes to handling finances. The credit score can say a lot about your financial management skills. If you have investors or business partners who own more than 20% of your business, they may also be subject to a credit check.
2. Seek credit before you actually need it.
Apply for any form of practical and logical credit soon after establishing your business. Doing so will help you immediately build a business credit history. Small businesses usually take up to two years before gaining the confidence of lenders. Obtaining a business credit card or getting a very minimal bank loan can speed it up. Your business needs to demonstrate its effective financial management capability. To accumulate positive credit scores, it is wise to get very small loans or credits and pay those immediately. That is why many businesses now take small loans even if they are not yet needed.
3. Have financing relationships with more lenders.
Don’t rely on just one loan provider, although loyalty pays off. Most of the time, lenders instantly change their lending policies and you may have a hard time accessing financing when you need it most. You may get a business credit card from a major bank and a business credit line from a credit union or local bank at the same time. Just be sure you have a fallback when your lender suddenly declines your loan application.
4. Find available alternatives.
Banks are not the only providers of business loans. You may consider non-traditional loan providers that offer and provide business credit at lower rates and better terms. Asset-based lending and crowd funding are possible options you may take if those are available in your area. Just make sure those loan providers report to credit agencies and that your diligent payments will reflect on your business credit scores.
The bottom line is that if you want capital for your business, it starts with building business credit. Now that you've reviewed the options, you can make a wise decision as you move towards a successful business.