Have you been postponing renovations? Does your equipment or inventory need an update, but you don’t have the financial means to do so? A business loan can help you! Of course, to acquire one, your company has to have a good business credit score.
When a business owner asks for a loan, banks and online lenders check their credit history. The result of those inquiries is what defines the amount, rates, and financing terms of the loans because the credit score determines how trustworthy people are. So raising this number is vital to improve business credit.
Will You be Able to Get a Loan?
If you want to get funding for your business, before you approach a bank or a financial institution, check the status of your business credit score with the Annual Credit Report.
If you have a score lower than 599 points, it will be hard for you to get a loan. Why? This reflects a previously negative behavior or a lack of credit history. If you are at this level, you will have to improve business credit right away, following the steps we provide in the next lines.
A credit score between 600 and 680 will allow you to get corporate loans but with a high interest rate, and institutions will ask you for more requirements. On this level, there is also an opportunity to improve business credit.
If you have more than 681 points, congratulations! You are a trustworthy client, and your loan application surely will be approved.
How to Improve Business Credit?
An inadequate administration of your debts may eliminate your opportunity to access business loans. If you want to improve business credit and level up your score, follow these five easy steps:
1. Pay your debts
Believe it or not, your behavior as a consumer will determine your business credit. Be sure that you pay your credit cards and bills on time, pay more than the minimum required, or pay them off every month. That’s the best way to improve business credit.
2. Don’t cancel the credit cards that you don’t use
It’s not enough to pay off credit cards and keep them safely in a drawer, so you don’t use them. It’s also not a smart move to cancel them, since this will lower your credit line. Only consider this option if the card charges an annual fee.
3. Don’t exceed 30% of your credit line
Exceeding 30% of your available credit may alert financial institutions. Try maintaining your debts between 5% and 30% of your limit; this way, your payment ability will be considered healthy.
4. Maintain a variety of credit products
Having a student loan, a car loan or a credit card, will show banks and money lenders that you are able to manage different debts at the same time.
5. Limit the number of credit applications
Every time you ask for a credit, institutions make inquiries about your credit history. So if you make a lot of applications in a short period of time, it can alert them from a possible fraud attempt. Moreover, each hard pull can make your credit score drop by around five points.
The Key to Access Loans
It is not enough to raise your score and improve business credit. To access to loans, is vital to meet these requirements to be a reliable candidate:
- Time of operation: Your company must be operating. Some credit firms ask for at least six months, or even years.
- Sales volume: Financial institutions may request a minimum sales volume each month. Be sure you have updated financial statements.
- Purpose of business credit: Banks and money lenders need to know how you plan to invest the money.
Improving your credit score will take you between 12 to 24 months, but it is the first step to reach your company goals. Start now!
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