If you’re ready to start a business or you need to expand your current enterprises, you’ll most likely be applying for a business loan.
Even if your business is doing well and you have the documents to prove your profitability, your ability to receive the loan amount you want with the interest rate you desire depends on more than your business, your personal credit also factors into a loan agency’s decision-making process.
Here is how your credit score impacts business loans.
Personal Credit and Loan Options
Stated by a Houston credit repair company, when applying for business loans, you’ll have several different loan options. Each one, however, factors your personal credit score into the application process. Loan agencies are not just looking at the health of your business, but how you, as the owner of your business, handle money.
Small Business Administration loans are highly sought after for their large loan amounts and their long repay periods. If you’re able to land an SBA, career options you could receive up to a maximum of five million dollars with twenty-five years to pay it back.
The best part about SBA loans is that you can acquire funding for nearly any business expense. Since these loans are highly sought after, it also makes the market fiercely competitive.
As a small business owner, you’ll need a minimum credit score of 680 to qualify.
Term loans are beneficial for their lump sum offering with fixed interest rates. Most times, you’re able to access the money once qualified faster than you would with an SBA loan.
However, due to the max amount and beneficial interest rates, you won’t be able to qualify for a term loan with a score much less than 680.
If your business has a healthy cash flow, but your personal credit doesn’t look so great, you may be able to qualify for a short-term loan. Short-term loan corporations focus on the health of your business more than your personal finances.
The main down-side to this loan is that there are shower repayment periods and higher interest rates.
Accounts Receivable Financing
If you’re waiting for a buyer to pay an invoice and you need cash to carry you over, you can apply for an accounts receivable loan. This is the only loan option that doesn’t require much scrutiny for your personal finances or business cash flow.
This loan is based upon the invoice being covered and will be repaid when the invoice comes in. The invoice itself is put up as collateral against the loan.
Keep Your Credit Score High
As you can see, having a high credit score is crucial to obtaining beneficial business loans. While you may keep your personal life separate from your work life, lending agencies do not view your finances that way.
You are your business, and, as such, your personal finances weigh heavily into the decision-making process. Keep your credit score high, and you’ll qualify for the most ideal business loans offered.
Are you ready to apply for a business loan?