Want to expand your small art gallery, hire more employees for your baking business, or want commercial equipment for your hair salon? Apply for a small business loan, and you have access to external funding without causing any disruption in your income and cash flow. You can get in contact with direct online lenders, commercial banks, local banks, Small Business Administration (SBA), and peer-to-peer lenders. These lenders offer financial solutions in the form of small business loans.
A line of credit (revolving credit), is an ideal solution to increase the cash flow of your company and to cover surprising expenditure. Account receivable financing allows the small business manager to get instant money in exchange for the company’s account receivables. A merchant cash advance is to cover short-term financial glitches, and the user pays the debt from ongoing credit sales. Term loans are ideal to cover the expenses of business expansion and renovation; these can be collateralized (secured) or uncollateralized (unsecured). Equipment financing and leasing is a budget-friendly financing option whenever you want to bless your office with a new machine.
Till now you have had a brief list of the lending institutions, and the types of loan that they are supporting. The next step would be to look at the constituents of the small business loan application. They look for the credit score/credit report, an asset in the business, time in business, tax return documents, and financial statement. Primarily, let’s shed light on the basics of the credit score, on its importance, how to keep track of it and what are some ways to improve it.
What is a credit score?
Basically, a credit score is a numerical figure that allows the lender to assess your financial capability to pay back the loan on time. There are two types of credit scores, business, and personal credit scores. If one day, you wake up and open your credit score report and see two numbers, for example, 85. Don’t spiral down into a depression after looking at your credit score. Know that a business credit score ranges from zero to 100. So, if you are standing on 87, then financially you are in pretty decent shape. On the other hand, a personal credit score ranges from 300 to 850. Other than the numerical differences, a business credit score and a personal credit score varied from each other on various metrics.
Both of the types of credit scores can be tracked by the business managers. You can track your personal credit score by using your social security number. On the other hand, you can tack your business credit score by typing in your name, address, and employer identification number. There is no rocket science involved in this, it is like checking your Instagram likes and followers.
Furthermore, the business credit score is public knowledge. With appropriate and adequate credentials, any company can look at your financial position. Although it is not a complex process the lender has to go to the credit score bureaus and pay for the credit report. There are three major credit reporting agencies; Experian Business, Equifax Business, and Dun & Bradstreet.
But before you consult these agencies, you must know the value and importance of keeping an eye on the credit score.
Why is the credit score given so much importance?
A credit score is like your least favorite cereal; you only come terms with it when you ran out of all the other options. If your business is running smoothly, then you are satisfied with any credit score. But if you need external funding to streamline the finances, then you need to apply for a business loan. This is where you need to get your hands on that credit score report and hope that you have a ‘good’ credit score.
A ‘good’ credit score allows you to enjoy the business loan at an affordable rate and flexible payment terms. Secondly, a ‘good’ credit score gives you access to a multitude of the small business loan without any collateral. Your stellar credit score is enough reassurance for the lenders. This doesn’t stop here; apart from the traditional and alternative lenders, other business managers and investors might prefer to partner up with you. So, a ‘good’ credit score has the power to make and lift your business.
A business credit score under surveillance!
One can have a stellar credit score and a balanced credit score report if one keeps an eye on it. So, far we have established the importance of a ‘good’ credit score. Tracking your progress is easier if you are using one of the following credit cards.
- Bank of America Premium Rewards Credit card: This is an ideal business credit card for sign-up bonuses. So, apply away and enjoy those rewards.
- Ink Business Cash Credit Card: If you are looking for a business credit card with no annual fee, this is your option!
- Ink Business Preferred Credit Card: If the expenses charges keep on changing depending on the product and service, this is a perfect business credit card.
- The Business Platinum Card from American Express: If you are always on the go, then this business credit card can provide you with multiple travel rewards.
- Capital One Spark Cash: It is always nice and pleasant to get benefit from the rewards.
- Capital One Venture Rewards Credit Card: if you run a particular type of small business that involves traveling. Get this credit card and get multiple rewards.
The list is not limited to these six types of business credit card, there are many other, such as ‘Discover it Cashback’ and ‘Wells Fargo Propel American Express Card.’
So, in order to see your business credit score, you have to contact these three reporting agencies that we previously mentioned.
So, Experian is the first credit score reporting agency that you can visit. You will get the business credit score comprising of two digits, ranging from one to 100. If you are lying between 76 and 100, then the potential lender doesn’t categorize you as a risky candidate. But if your credit score is between 1 and 10, then this is an alarming situation for lenders think you are more likely to default on your payments. Having a score between 26 and 50 means you have a fifty-fifty chance of getting loan approval. In addition to this, Experian allows you to see your payment history and transaction history, but all this financial information has a price attached to it. Go to their official website, pay $39.95 – $49.95 to Experian, and get all the numbers you want. It might sound like an expensive deal but we assure you it is all worth it.
Just like Experian, Equifax allows the small business owners and managers to access their credit score report. But in addition to the simple credit score report, Equifax gives you access to the ‘risk score’ and ‘failure score. ‘These scores will help you, and the potential lenders can assess your credibility to make all payment on time. Then again, this valuable information does not come for free. Equifax allows the business owners to order a credit score report for $99.95.
Dun & Bradstreet
In order to see your credit score, you need access to CreditBuilder, and this package will cost you $159 monthly. Same as the above reporting agencies, Dun & Bradstreet scores businesses from one to 100. If you have a score of 80, then you are not prone to default on your payment. On the other hand, if you have a score between one and 49, you are in fact a very risky borrower. Although this is an expensive deal, it allows you to add your previous payment history to your profile.
Now that you know all the basics and sheer importance of the credit score, you must keep monitoring your credit score by going to these agencies. If you have a bad credit score, you can take advantage of various tips and tricks to improve the score, such as paying on time, making sure that you are running an officially registered business, and, again, keeping a check on your scores.
If you think your credit score is in impeccable shape, then head over to our website and explore the wide range of small business loans. Pick the one that satisfies your financial needs and suits your business. You can also follow us on Twitter (@Onlinecheck) and Facebook (@Onlinecheck) for tips and tricks. Have any query? Call us on our toll-free number at (833) 827-4412. If you are still unsure about your credit score and funding & financing requirements, then get in touch with the financial advisors of the Merchant Advisors.