I am part of a great group of networkers called the Absolute Business Builders. We are part of Business Networking International (BNI), which is comprised of mostly small business owners. Through the years with BNI, I have had multiple business owners come to me for help because they have been turned down for business loans.
What many small business owners don’t realize is that in many cases it is their personal credit that stops them from obtaining credit. The banks may want these business owners to guarantee the loans personally. It used to be that business loans would be based on income from the business, however; with so many companies going under, the criteria has changed. Banks often use a blend of personal and business credit. They may think that if you don’t manage your personal finances how will you manage the business?
The first step would be to check your personal credit and see if there is anything on it that would keep the bank from approving you. If there is, it would be to your benefit to seek a reputable credit consulting company to see what can be done to correct the errors on your credit report, raise your credit scores and provide you with the consumer credit education you deserve.
Secondly you can pull a business credit report that will tell you where your business rates, the scores range from 0-100. Zero being a high risk and 75 and above being an excellent risk. According to Experian:
Experian® uses standard industry and government guidelines for keeping data on file. Dating data ensures that the information presented in a report is current enough to create an accurate picture of financial health.
- Trade data: 36 months
- Bankruptcies: nine years and nine months
- Judgments: six years and nine months
- Tax liens: six years and nine months
- Uniform Commercial Code filings: five years
- Collections: six years and nine months
- Bank, government and leasing data: 36 months
Unlike your personal credit, business credit is NOT covered under the Fair Credit Reporting Act. There are ways to correct items on your business credit report if you know how. Once you know where you stand you can ask your bank for a business credit card or loan. If you have to personally guarantee credit for your business that is okay for now, but ideally you want your business to stand alone and not be part of your personal finances. Ask the bank what it will take for the business to have its own credit line so you can work toward that.
Another good way to build business credit is through your suppliers. There are many suppliers out there that will extend credit to business owners once you have established a good working relationship. Make sure you ask them if they report the business’ credit worthiness to the credit bureaus.
Once you are extended credit it is imperative that you pay on time every month. Don’t extend yourself to the point that you cannot make the payments. Having bad credit is worse than having no credit!