People with credit reports in good standing are typically able to obtain small business loans or a business line of credit, and to do so with low accompanying interest rates. Banks, credit unions and other lending institutions generally look at individuals with high credit scores as being responsible citizens who are likely to repay debt and to be responsible with the money of others as well. Credit reporting agencies such as Experian consider scores over 700 to be those in good standing.
Before you apply for a small business loan or business line of credit, it is important to know what your credit score is. If you are unsure about your credit score number, you can obtain it from Experian, Equifax, or Transunion. You can request a free credit report from the three credit reporting agencies every 12 months. A score of less than 620 is usually considered to be a bad, or sub prime, credit score. If your score is at 620 or below, you may want to check your credit report for instances of identity theft and for errors. If problems or errors exist, report them and work to have them resolved.
If there are no errors found, then it is a good idea to diligently pursue improving your score, before you apply for business financing. The first step to take on the road to repairing your credit is getting current and staying current with your existing debts and financial obligations. Scores do change as new information is added to your file.
If you need a loan fast and don’t have time to improve your score, you may still have options. Lenders may consider your existing employment and income and still be willing to extend a loan to you. Be prepared, however, to potentially pay high interest rates if your credit score is less than optimal. Keep in mind that high interest rates mean higher payments, so shop around for the best rates and deals.
You may also want to consider asking someone to be a co-signer on your loan. Be sure to ask someone who has a high credit score, to increase your likelihood of obtaining the loan. Again, a good score is generally thought of as 700-720 or above, but the higher the score, the better your chances of procuring a small business loan or business line of credit.
If a bank and/or co signer are unwilling to take a financial risk on you, you may want to consider financing your business with small business credit cards. Many banks offer business credit cards to sole proprietors, new LLC’s and corporations with high enough limits that they can be used to finance a new start up. If your credit score is not perfect you may still be able to qualify for a business credit card, you may just have to pay a higher rate. But remember, you can always pay off the balance in full each month and avoid finance charges.
If you can’t qualify for a small business credit card, look into obtaining a prepaid credit card. These types of card are generally only available for small balances, so if need an amount up to $1,000 they may suit your needs. While that does not sound like much it can be plenty to start a business online, as expenses such as web hosting and web design can be outsourced to other countries for very low fees.
The bottom line is that there are many business start-up loan options available to you, even if your credit score has substantial room for improvement. So don’t give up on your dreams of entrepreneurship just because of a less than perfect credit report.
Before you apply for a small business loan or business line of credit, it is important to know what your credit score is. If you are unsure about your credit score number, you can obtain it from Experian, Equifax, or Transunion. You can request a free credit report from the three credit reporting agencies every 12 months. A score of less than 620 is usually considered to be a bad, or sub prime, credit score. If your score is at 620 or below, you may want to check your credit report for instances of identity theft and for errors. If problems or errors exist, report them and work to have them resolved.
If there are no errors found, then it is a good idea to diligently pursue improving your score, before you apply for business financing. The first step to take on the road to repairing your credit is getting current and staying current with your existing debts and financial obligations. Scores do change as new information is added to your file.
If you need a loan fast and don’t have time to improve your score, you may still have options. Lenders may consider your existing employment and income and still be willing to extend a loan to you. Be prepared, however, to potentially pay high interest rates if your credit score is less than optimal. Keep in mind that high interest rates mean higher payments, so shop around for the best rates and deals.
You may also want to consider asking someone to be a co-signer on your loan. Be sure to ask someone who has a high credit score, to increase your likelihood of obtaining the loan. Again, a good score is generally thought of as 700-720 or above, but the higher the score, the better your chances of procuring a small business loan or business line of credit.
If a bank and/or co signer are unwilling to take a financial risk on you, you may want to consider financing your business with small business credit cards. Many banks offer business credit cards to sole proprietors, new LLC’s and corporations with high enough limits that they can be used to finance a new start up. If your credit score is not perfect you may still be able to qualify for a business credit card, you may just have to pay a higher rate. But remember, you can always pay off the balance in full each month and avoid finance charges.
If you can’t qualify for a small business credit card, look into obtaining a prepaid credit card. These types of card are generally only available for small balances, so if need an amount up to $1,000 they may suit your needs. While that does not sound like much it can be plenty to start a business online, as expenses such as web hosting and web design can be outsourced to other countries for very low fees.
The bottom line is that there are many business start-up loan options available to you, even if your credit score has substantial room for improvement. So don’t give up on your dreams of entrepreneurship just because of a less than perfect credit report.
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