There isn’t anything quite as disappointing as having a bank deny a loan. What’s even worse is when you didn’t know it was important to have both business and personal credit histories.
You aren’t by yourself.
According to Nav, a small business ecosystem to help business owners manage finances, as of 2016, 45% of business owners didn’t know they needed to have a business credit score.
Furthermore, in 2017 the Small Business Administration reported results from a capital study indicating that 20% of small business loans aren’t approved due to bad business credit.
If you can’t qualify for a loan, Camino Financial can teach you how to build business credit to avoid getting caught in the crosshairs of not qualifying to borrow money. Once you become a lower credit risk in the eyes of lenders, you can qualify for better rates.
The following hypothetical example will help you understand the importance of having a good business credit score and how it’s possible to start building a credit score within a few days.
You Can Increase Your Credit Score Even After Being Turned Down for a Loan
Learning how to build business credit was never on Daniel’s mind while operating his pizzeria on his hometown’s main street. Along with one employee, he kept up with a steady stream of customers.
Once people started waiting in line, Daniel knew he should make improvements to an adjoining property he owned. Because he had an excellent personal credit score, he applied for a loan with his local lender.
Unfortunately, the lender turned down his application due to his poor business credit score.
He also learned during the meeting small business lending is very strong compared to 2008.
His lender discussed with him some steps that he could take to improve his business score. Daniel now knows he should apply for a business bank account and credit card.
By establishing credit in his business name and paying his debts on time, suppliers and lenders will take him more seriously. He also meets with his accountant to incorporate his business and apply for an EIN rather than using his social security number.
Daniel implements these tips and orders a free credit report to verify there aren’t any errors. After waiting a few months, Daniel applies for the loan and is approved. Now, he has the working capital he needs to expand his pizza business.
From beginning to end, the steps on how to build business credit weren’t hard to complete. Daniel assumed it would be a complicated process to establish a business credit history but it wasn’t.
By making these changes, his business continues to grow and thrive.
Build a Credit Score and Reap the Benefits
According to the SBA, small business lending is on the rise. In 2015 depository institutions approved 6.0 million loans valued at $225 billion which has continued to increase from 2013. So many small business owners try to get capital to invest in their business without realizing the importance of business credit.
It doesn’t take long to identify with how a business owner feels when they rely solely on personal credit history to affirm creditworthiness. Financial rejection is never pleasant and entirely avoidable when you know how to build business credit.
By taking simple and straightforward steps you can build your FICO credit score quickly as Daniel did. Afterward, he was able to get a business line of credit and have finances to make improvements to his operation.
How about you?
Are you ready to make sure your personal and business credit histories are in good order so a lender can approve your loan? It only takes a few minutes to find out what you need to do.