It is expected among people who have recently opened a business or running a small one to sacrifice more of their time to reach success. The ability to obtain small business credit from lending companies on the other hand is directly related to the operator or business owner’s financial reliability. Keep in mind, among the things that banks and lending institutions will initially ask is the proof of financial standing in the community.
If the applicant is seen to have bad debts, bad loans or bankruptcies in their past personal finance, then there is a big chance that the bank will feel reluctant in providing small business financing or credit. Even though they agreed to provide funding, they are almost always charging a premium interest and might also demand cosigners or guarantors. So before heading to the bank and apply for a line of credit to your business, it is preferable if you would take a look of your credit rating first.
The good thing is that, there are already a number of loan programs to which you could apply for that are not using personal credit similar to merchant accounts or cash advance and accounts receivable factoring.
There might be omissions or errors on credit report that can be amended or changed before it is turned down by the bank for loan application. There may also be chance to contact former creditors as a way to seek arrangement before you ask the lending institution to look at your commercial credit requirements. And despite the fact that it already stained your financial record, this can give you an opportunity to explain to the bank why such thing happened before and give them an assurance that this is something that would not happen again.
What’s more, small business credit application can allow you to apply for start-up funding in launching your business. It may be small business line of credit that can be used for short term emergencies or perhaps, during months where there’s tight funding. It could be a business loan that you may use in buying new equipment or purchasing property on where to build your headquarters. Your commercial lender or bank can help in making the right decision for small business credit in order to meet your specific needs.
It’s difficult to break into small business lending primarily because of the risks associated to small business. This is true particularly in the first two years of operations where most are failing. However, once you have established yourself in it, it’s easier and you’d see the results of efforts you are pouring in.