Step 1: It all starts with you!
The first place to begin is with your personal credit.
Many small business lenders look not only at the business’ ability to repay a business loan, they will look at the individual business owner’s credit profile applying for the small business loan. Don’t get frustrated!
I’m a business owner myself. I’ve owned several prior businesses before my frustration with the banks funding my brick and mortar businesses led me to figuring out this game myself. I basically went on a quest to figure out how to separate my personal credit from my business credit so I could get a business loan. It was an almost year long quest to figure it out. And when I did it was apparent that it was not only going to work for me but for virtually any small to mid sized business owner looking for a small business loan. So, I totally understand what it’s like to try to build a business – and until I figured it out I did it ALL with personal credit. You do what you have to do, right? I understand that.
Do you think I had perfect credit? Absolutely not! Most business owners don’t. That’s why we recognize that small business owners don’t have perfect personal credit scores.
Small businesses have always had trouble getting bank loans. Many are declined because banks base their evaluations solely on the owner’s credit standing. As a small business lender, we offer our performance-based model that makes it much easier to get a small business loan. It’s available to those that just miss the cut for traditional bank loans.
In fact our mission at Sunwise Capital is to help business owners achieve their goals by giving them access to a business loan. You may be a young company, have poor personal credit, be losing money, or lack collateral, but that doesn’t necessarily mean you’re not able to get that business loan.
Bear in mind that a recent CNN report showed that 95% of all credit reports have errors and at least one-third of those errors are detrimental enough to be denied additional credit (or in your case a small business loan). We see it all the time! Most credit profiles are inaccurate. And many consumers and business owners are denied business loans through no fault of their own.
No wonder business owners are having troubles getting the small business loans they need! It doesn’t have to be that way.
The key is to separate your business expenses from your personal credit. This reduces the debt ratio and begins to turnaround your personal credit score while at the same time building your business credit.
How do I go about building business credit in order to get that business loan?
The key is to establish good business credit scores with all three-business credit bureaus. How? Find vendors, suppliers, small business lenders and credit card companies that can give you a little credit without using your personal credit score as the basis.
The next step is to have them report your business payment history to the credit bureaus. Next, you must complete all the basic lender approval requirements.
Just about every lender works with a checklist of about 20 items – each one is required.
Some of them are very simple things like you must have a business license and a dedicated phone line listed under the legal business name with 411-directory assistance. If you’re missing just one of these 20 items, however, your business loan is automatically denied.
WARNING! 1… 2… 3 strikes and you’re out!
Unfortunately, this is no game.
Let’s face it. Creditors and business lenders are looking for any reason possible to deny business loans. It used to be that one out of every 10-business loan applications was approved.
Today, the figure is as low as 1 out of every 100 – and most of those denials are due to not complying with one of the 20 requirements on the checklist.
I’m sure you’ve heard the expression, “3 strikes and you’re out.” It is true when applying for credit. Every time you resubmit your application because you’re missing something from that checklist counts as another strike. Any more than three and you won’t even be considered for a business loan for at least 90 days!
That’s why it’s so important to begin with the foundation for building business credit. Most business owners on their own skip this step … and pretty soon it’s 1 … 2 … and 3 strikes you’re out! Let me know your thoughts and in the next blog I’ll teach you how to lay a proper foundation.