Looking for Business Credit?

Whether you are looking for capital to launch a new business or to see an existing business through challenging times, you probably know that securing business credit isn’t as easy as it used to be. In fact, it’s among the biggest challenges facing today’s business owners. What’s a business owner to do? How can you get yourself in the position to secure the financing you need? You can take some matters into your own hands by following these key steps.

Start early and plan ahead. 

One of the biggest mistakes business owners make is waiting until they absolutely need the credit to apply.One of the biggest mistakes business owners make is waiting until they absolutely need the credit to apply. It’s better to start your search for credit long before you need it. Ask your colleagues or professional advisors (attorneys or accountants) to recommend financial institutions that lend money to businesses like yours.

Monitor your credit. 

Owners of newer businesses must often use their personal credit history to obtain financing. If that’s your situation, be sure to review your personal credit reports and work to clean up any problems six months to a year before applying for a loan. Some ways to improve your credit score include paying your bills on time, correcting errors on your credit reports and paying down credit card balances.

Of course, you’ll want to start establishing credit in the name of your business as well. One of the best ways to accomplish that is to apply for a credit card in the name of your business. Once you’ve established a history of borrowing and repaying funds, you’ll be well on your way to creating an established credit history that will help you later on.

Get free business counseling. 

Today, there is no shortage of organizations that offer free counseling for business owners. The federal government’s Small Business Administration (SBA), for example, offers training and assistance to help business owners with various aspects of managing a business. These resources can be invaluable in helping you prepare to meet with a lender. Check out the SBA website, www.SBA.gov, to learn more.

Consider your collateral. 

When approving credit for businesses without established credit histories, financial institutions will consider what you have for collateral (assets to guarantee payment of the loan). Collateral might include property or equipment owned by your business. If your business doesn’t have sufficient assets, your home may be used as collateral. Take a careful assessment of your collateral to determine what you might be able to offer a lender as security for a loan.

Choose a lender that offers SBA financing. 

SBA financing is designed to help businesses with less established credit histories secure credit. By finding a lender that offers these programs, you’ll put yourself in a better position to secure financing.

Get your financial statements out. 

Before you can request money from a lender, you’ll need to provide financial reports on your business. Lenders usually require three years of financial statements for established businesses. You will also need to provide personal tax returns.

Invest in your business. 

When evaluating whether or not to loan you money, lenders will look to see how much of your own money you are willing to put up. In general, they want you to have at least 25% equity in the business. Investing your own money shows lenders you believe in your business.

While getting credit is not as easy as it used to be, it’s still possible. It does require commitment on your part, however, so do your homework and get yourself in the best position to borrow.


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