Success For Your Business
Key Success Element #11 - Owner's Fundability
What The Success Assessment Does For You
Let's You See Your Current Status On 12 Critical Points That Are Key To Your Business Success
All too often business owners do not pay attention to their personal credit scores. Then, when it comes time to need business financing, they are unable to get approved due to their low personal credit scores. The days of easy to get loans are over. Lenders of all types; homes, credit cards, cars, and businesses are looking for validation that their loans are going to get repaid. One of the first places they look for that validation is on your personal credit reports and scores.
What is it that business loan and credit providers are looking for in your credit reports and scores?
FICO Credit Scores - The first thing they look at are your FICO credit scores. There are a lot of other scoring systems out there, but most lenders use FICO as their standard. For business financing, the optimal score is a 700 or above. Of course, higher is better, but anything 700 an above is an asset you can use to obtain business financing. In this information age business lenders do not stop with just looking at your scores.
Your Credit Usage - In the business loan approval process, lenders are going to look at how you use credit. This means they are going to want to see positive patterns in your credit usage, including: your credit lines are not maxed out showing that you are not in a position to use credit in order to pay credit; you do not have a large amount of available credit which you could draw down upon that would place their loan in jeopardy; and you have a varied use of credit between mortgages, installments, and credit cards.
Optimal Credit Pattern - Its said that a 1-2-3 pattern of personal credit provides for an optimal score and what business lenders are looking for most. That pattern is 1 mortgage, 2 installment accounts (cars, appliances, furniture), and at least 3 credit cards. In the case of credit cards, it is better to have three $5,000 cards than five or six $1,000 cards. In addition, business loan providers or business credit card issuers are going to want to see no more than 30% of the available credit limit as being currently used. Most business lenders want to see at least 4 reporting trade lines on your personal credit reports.
What To Do If Your Credit Scores Are Low - There are two things you can do. The first is to get some help to raise your personal credit scores, and we can help with that. The second is to get a "Credit Partner". That is someone who already has all the above who would be willing to become a partner or officer of your company in exchange for the use of their credit to help you obtain business financing. Think of this like a co-signer. Business lenders are going to want to see that this person either owns at least 20% of the business or is an officer of the business. This typically means they are on the business bank account and Secretary of State filings.
If you don't have great personal credit scores all is not lost. There are many business loan programs where personal credit is not a big factor. With these business loans, things such as your; outstanding invoices, gross monthly revenue, merchant processing receipts, or other hard assets are the key factors. However when the owners of the business do not have good personal credit scores you can expect to pay more for the money that your business receives. The assessment will provide you with some insights on things you can do to raise your personal credit scores quickly.
