Understanding How Your Personal Credit Score Effects Your Business Loans

Business financing is difficult to obtain for new and existing businesses alike. However, what many SMB companies aren’t aware of is the fact that if you are business loans in Onondaga Countylooking for a small business loan in Syracuse, banks look at your personal credit score. The health of your personal credit score impacts your ability to obtain a loan with an A lender.

How Well Do You Manage Money?

According to the Small Business Administration, an individual’s credit score represents how well they manage their money. Therefore, if you have a low credit score, the banks consider you a poor risk because of your bad financial management. The SBA will also only approve business loans for those who have impeccable credit.

Bringing You’re A Game

So what score do you need in order to obtain financing from an A lender? If you have a credit score of 720, then you have a good chance of being approved for a business loan and receiving favorable terms. If your credit score is below 660, then you will have a difficult time finding an A lender who will approve you and you will most likely have a less favorable interest rate.

Alternative Lending Options

If you have poor credit you can still obtain a business loan. If you approach local or community banks you have a better chance of obtaining a business loan since their approval process is often more lenient than national banks. Credit unions are also more forgiving when it comes to personal credit scores and past financial mistakes.

Another option to a standard business loan would be to apply for alternative lending options that are available for small business financing in Central, New York. There are several different alternative lending options available, such as:

  • Stock based lines of credit
  • Merchant Cash Advances
  • Asset based loans
  • Revenue based loans

Revenue based loans are a financial product where a bank looks at the past six months of a company’s revenue. If a company has more than five deposits a month and generates $10,000 a month in revenue than you can qualify for a revenue based loan.

Some Bad Credit Restrictions

There are some instances where even alternative lending products aren’t an option. If you have filed for bankruptcy within the past year or have unpaid tax liens then you won’t be able to obtain a business loan or alternative lending product. People who have been convicted of a felony or financial fraud will also be unable to apply for a business loan.

Having good credit is the surest way to guarantee that you will be approved for a business loan with an A lender. Having poor credit doesn’t exclude you from obtaining a loan, however you may need to turn to your community bank or apply for an alternative loan. Looking for the best loan for your business may take some research but if you understand how your personal credit score effects your business loan then you are have taken a step in the right direction.

Published December 21, 2016 by Carol Chernikoff in Finance


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