The economy, three years removed from the financial crisis, is still beset by stubbornly, sluggish growth, which makes it as harsh a climate as ever for small businesses and startups looking for financing.
Whether or not a bank agrees to give you a loan depends on your business or personal credit. For entrepreneurs hoping to secure startup business loans, poor credit can pose a huge problem. Credit is based on prior business records, and for people new to the game, or who have stumbled in the past, it can be hard to convince lenders to make a loan.
Luckily, if your business experience is a little on the short side, you can offer your personal credit history. There are some advantages to personal credit. For starters, you can challenge credit agencies if you believe that your credit report is inaccurate. The Fair Credit Reporting Act ensures that unfair credit reports can even be eliminated from your history. But there are no such laws when it comes to business credit, and appeals are handled by the agencies themselves.
It’s a good idea to keep your business credit separate from personal credit. That way, an unexpected downturn in your business won’t damage your personal credit, and vice versa. Business credit also makes your business appear more legitimate, and may help you overcome lenders’ more onerous restrictions.
If you’re looking for startup business loans, having bad credit presents cumbersome obstacles. Bad credit is reason enough for a bank to reject your application. If they offer you a loan, banks can use bad credit as an excuse to pile on higher interest rates or more fees.
Having bad credit is a sore subject, but it doesn’t have to be the end of the world. There are steps you can take to rectify the situation. Here are five tips to immediately start improving your credit:
- Cut down the number of credit cards Easier said than done, right? But decreasing the number of credit cards can help ensure that you don’t overextend yourself financially, while also allowing yourself to pay off your credit card debt more quickly.
- Have solid references If your credit isn’t pristine and you’re applying for small business financing, having reputable and qualified references that can attest to your character may tip the scales in your favor. Favorable references can help better explain to the banks the story behind your mediocre credit, and why it shouldn’t be an impediment to their offering you a loan.
- Ask for a favor It can’t hurt to ask your lender to remove small blemishes in exchange for a record of on-time payments. These are often called “goodwill adjustments” or “goodwill deletions.” This is where politeness and a history of being a good customer can come in handy.
- Be prudent when it comes to using your credit card If you have bad credit, simply abstaining from using your credit card in the future won’t help you that much. Credit agencies want to see that you can spend reasonably and pay back the money in a timely fashion. So don’t be afraid of using your card -even if it’s just lunch – as long as you use it smartly.
- Apply for an unsecured business loan If your bad credit is preventing you from receiving small business financing, then an unsecured business loan might be just what your startup business needs. These loans don’t exceed $50,000 and don’t rely on collateral. Rather, you’re only charged interest.
Biz2Credit has streamlined the small business loan application process. No more going from bank-to-bank, filling out mountains of paperwork. All you need to do is fill out just one online application and be offered the most attractive lending rates possible. That’s why turning to Biz2Credit for all your small business financing and refinancing needs is both quicker and more efficient. Call (800) 200-5678 or visit www.biz2credit.com