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What is one of the most important factors in obtaining business financing?
Your personal credit history!
Whether your financing is for a new business or a growing small business, whether you plan to establish your business as a Sole Proprietor, a Partnership, an LLC or any other kind of business venture, your personal credit history will strongly influence the results.
Whose personal credit rating and history are considered for business loans?
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Those who have never owned a business before
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Owners of a small business
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Those who are looking for a loan of $400,000 or less
Why this group of people?
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Banks and lending institutions have no other credit history on which to depend to see how you handle credit
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To see if you pay your commitments on time
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To learn if you are dependable
If you don’t pay your bills, or if you pay them late when you are personally liable, then why should you pay your bills on time if you are ‘protected’ because you’re a corporation or LLC?
Are Credit Reports accurate?
Approximately 40% of all credit reports have errors. Therefore, review and understand your credit reports so you can correct any errors before you apply for financing of any type.
Where Can I Obtain My Credit Report?
Under the Fair and Accurate Credit Transaction Act, every American may receive a free credit report every year from each of the three major credit reporting agencies:
You can go to
www.annualcreditreport.com
or call 877-322-8228 and ask for the Annual Credit Report Request Brochure. Simply complete the form and follow the instructions.
We recommend you obtain a copy of your Credit Report at least 6 months before you apply for financing. Then if there are errors or issues they can be cleared up before the loan application is submitted.
It sometimes takes credit reporting agencies several months to investigate your claim of inaccuracy. They have certain legal requirements they must follow in order to remove any errors. Be patient, yet consistently follow-up with the agency to make sure the process is taking place.
What is a Credit Score?
Your Credit Score, based on FICO® scores, reflects a numbering system designed to summarize all of your credit information in one number. The scores range from a low of 300 to a high of 850.
The higher your credit score, the better.
Many banks and other regulated financial institutions will not led money to those with credit scores below 650-680.
These prospective loans are higher risk and since the lending institution would have to set aside higher reserves on these so they are not inclined to give you an approval.
It’s a lot harder for a loan officer to justify a loan if the score is 600. However, if the score is 800, you should be able to easily obtain a loan.
You will probably not be eligible for Small Business Administration (SBA) and other government guarantee programs if your credit score is below 580.
What if I’m turned down for a loan?
Don’t give up on the first try!
If you’ve studied your credit report and fixed any errors before applying, and if your credit score looks respectable, you can always shop your application around to other lending institutions.
However, keep in mind that each time a different financial institution requests to see your Credit Report, that request is recorded on the Credit Report. Too many requests will also lower your credit score.
How do I ‘read’ a Credit Report?
All the various codes used on a Credit Report can be confusing. A full explanation is provided in the book, The Entrepreneur’s Guide to Prosperity -- Financing Your Small Business, by Morris Bocian.
If you think fixing your Credit can enhance your Cash Flow, or if you feel fixing Your Credit would benefit your business, e-mail us at
CashFlow@NowFinancing.com. We would sincerely like to answer your questions and remove any confusion on the subject.
And, of course, No Obligation! We truly would like to answer any questions you might have about Factoring.
A more detailed explanation of
Factoring is provided in the book,
The Entrepreneur’s Guide to Prosperity -- Financing Your Small Business, by Morris
Bocian. |
