At some point in your business life, if you want to expand your business, you will really need to apply for a business loan to finance whatever expenses you may incur. For newly established businesses, they still have no credit score in the early stage. So lenders will look at your personal credit score to determine if you are creditworthy.
If you have a credit score of 650 and above, your application will most likely get approved. However, many business owners have a low or bad credit score, so they could have a hard time applying for a loan, and thus the opportunity for business expansion. With that in mind, here are some options on how to improve your credit score when applying for a business loan.
Hire a Professional
One of the best ways to improve your credit score is to hire a professional. This is not only applicable to business loans but any other loans. The reason for hiring a professional is sometimes there are errors in your credit report that need to be handled. One example of this is debts that are already paid, but the lender failed to record them.
With the help of the professionals, they can take action and file a dispute regarding the erroneous transaction. Not only that but during the credit repair process, there’s a team assigned for you.
So if you have concerns, they can help you right away. It’s normal to be skeptical when hiring professionals. Firms such as Credit Saint have lots of reviews so you’ll be at ease with their services. You can read a Credit Saint review easily online as they’re legit and have a good online presence.
Pay Debts Regularly
Paying your debts regularly means paying them on or before the due date. Once you pay your debts, it will record the deduction in your debts and how good of a borrower you are. Hence, improving your credit score from time to time. Besides, it’s a good idea that if you already have the means to pay your debts, don’t wait too long before paying them.
Also, paying your debts regularly will play a vital role when you apply for a business loan. The reason is that when lenders such as banks look at your credit history and they notice how you pay your bills religiously, there’s a chance that you’ll get approved even with bad credit. Because sometimes, lenders will think that even if you have huge debts, your payment history says that you are committed to paying your debts, so they won’t hesitate to lend you.
Present a Collateral
One of the most effective ways to get approval for a loan, even with bad credit, is to provide collateral. Providing collateral means pledging something to the lender as an assurance that you’ll pay what you owe. Truth be told, when you have collateral, lenders won’t look at your credit score or credit history because you already gave them an assurance that you’ll pay.
The examples of collateral you may pledge as security are your Personal assets, Savings account, and Accounts receivable invoices. But it would still be best to have collateral that you are comfortable with losing. The reason is in the event that you can’t pay your debts, the lender has the authority to repossess the item put in collateral. So putting your car or the establishment itself as collateral is not a good idea.
Look For a Trusted Co-signer
Another great solution to still get approved even with bad credit is to add a co-signer. Most of the time, lenders will accept co-signers that are your immediate family members. Same as you, the co-signer is obliged to shoulder the debt if you are not able to pay them yet. However, another qualification for a trusted co-signer is they must have a good credit score.
Keep in mind that the lender will not require you to have a cosigner if their assessment is that you can pay the loan or have a good credit history. But sometimes, just to have extra assurance, they require you to have a cosigner. So if you surely know that you qualify for the loan and don’t need a co-signer, just comply with them to have a smooth transaction and build trust.
Don’t Mix Business with Personal Expenses
In order for your business credit score to improve and have a high chance to qualify for a business loan, separate them from your personal expenses. Although lenders will look at both your personal and business credit reports, it is still your business credit report that will weigh the most in qualifying for a loan. So you may want to separate those personal expenses or personal debts so as not to damage your business credit score.
There are many reasons why you might apply for a business loan; whether for expansion or unexpected expenses. Now that you’re armed with the means to overcome poor credit, you hopefully won’t let that stop you from growing your business in to what it’s meant to be.