Business loan eligibility is something of enormous concern, especially for new start-ups. New business owners are usually confused as to what they would need to secure one. But the most widely asked question is “what credit score do I need?” The answer is not far-fetched as the requirements for loan depends on the lender or bank.
Traditional Lenders and banks would always insist on analyzing your personal and business credit score before loan approval. Building business credit is usually difficult in the beginning, but it is something you should never stop aiming for.
What is a business Credit score?
Business credit score is number that has been accumulated by a business through expenditures and profits. This score pertaining to the business determines whether a business is capable of receiving a loan. This score gives a sort of reassurance to lenders and banks that the loan can be repayable by the borrower.
Usually, one has to pay to have their credit score calculated. You can go to any reporting agency to look up your credit score after paying for the service. Some of the agencies can even help you keep tabs on it. Click here to get more about business Credit score.
High business credit score increases the likelihood of your small business loan application being approved. Establishing your credit score is expedient to your business growth. It gives small businesses the avenue to secure competitive loans, protects their personal credit and get better insurance rates.
Business credit score versus Personal credit score
Although business credit scores and personal credit score may differ, they are both still important to the smooth sailing of your business. While business credit score runs from 0 through 100, personal credit score is scored on a scale of 300-850. With 75 and above being the most ideal for business credit score, and 750 and above being the ideal score for personal business score. Learn more about credit report and score basics.
Business credit score cannot be tracked with social security number unlike personal credit score. Business credit scores are also publicly available, while personal credit scores are not. However, it is still required for your score to be high on both side to gain small business loan eligibility.
How do I build small business credit?
Building good business and personal credit score is not always easy for small business owners. Here are some important steps that can be taken to build your credit score.
- Official registration of your business with the LLC is the first step. People are of the idea that if they can pay their debts on time, they automatically have a good credit score. That ideology is misleading. As you need to be registered first, before your history of on-time payment can be recorded.
- Make early payments
- Acquisition of a business credit card and a business account.
- Use vendor services that reports your payments to the business credit bureaus.
- Regularly check up on your scores.
All the listed tips will assist you in getting your business score up to par. Small business owners need not be afraid of applying for loans after reading this article.