You’ve worked hard to start your own Kitchener marketing business and gain financial freedom. However, as days go by, it’s getting harder and harder to keep pace with the seemingly endless flow of problems. Beyond the regular day-to-day hardships and challenges that you face, there is one big issue that seems to go understated: securing the much-needed financing for growth and business sustainability.
Although the opportunities for financing may seem to be increasing, a strong majority of small business owners are in fact left in the dark – and most likely, you are going through it as well. Finding capital has become a real issue, and you might not even know why, leaving you feeling frustrated, exhausted, and confused.
What is the reason behind so many credit loans rejections, when the bank financing options don’t seem to have reduced or disappeared? What can justify the nearly one out of five business owners that have reported being turned down, even several times in a row, after having sought out a loan in the past five years?
Bank aren’t obligated to explain to you why they’ve rejected your loan, so it’s hard to fix a problem if you don’t have all the data. But the truth is that these rejections are all based on one very good reason: the businesses applying for the loan have a low business credit score. Bank financing is huge because it allows you to focus on your business growth and not on covering costs. It can be a deal maker for giving you the chance to go beyond “small” business. By improving your business credit, you can increase your chances of being approved for a bank loan that could transform your company.
The Challenges Small Businesses Face
The real reason why small businesses aren’t getting their loans is that the owners don’t understand what their business credit score is, and they don’t know what to do about it. In fact, it seems that almost half of business owners do not even know that such a thing exists – so no wonder applying over and over again for a loan without addressing this issue is just futile.
To stop working against your interest and stop making all those efforts in vain, you have to understand what a credit score is all about and how it can affect you. You might not only be unaware of your credit score, but you might have actually, without your knowing, damaged your chances of getting the loan – mostly by maxing out your personal credit cards or your credit lines.
The way the business credit score works is pretty simple once you get the right information. The easiest way to understand it is to look at it the way you look at your personal credit score. Based on your personal credit record that you are assigned, the bank analyzes your overall creditworthiness – or the ability to pay your debts on time. It is an essential metric for banks to ensure they keep their potential risks to a minimum.
Not only are you given a business credit score, but all applicants are ranked according to their ability to make on-time payments. The analysis of this creditworthiness, and the process of receiving good credit score, are based on personal and business credit history, along with other relevant financial information. To be able to pass the first eligibility conditions for the Small Business Administration’s most wanted loan, you have to obtain a minimum of 140 points out of a total of 300.
Start Building Your Credit Score
So what can you do to actively build a credit score and increase your chances to get a small business loan?
Strengthening your credit score should begin as early as possible, and it should be a major factor in your everyday business decisions. Over time, the weight of a poor business credit score can become a crushing burden that’s difficult to overcome. For example, one important action that you have to start implementing is committing to timely payments to vendors and suppliers – your bank will love to know you are reliable in your day to day payments. Getting that credit score up is, therefore, a long-term strategy that has to be implemented step by step.
Start analyzing in what ways you are damaging your credit score, and learn how to keep it on the rise. Studies show that when it comes to understanding your business credit score, you are 40% more likely to be chosen for that business loan you need.
Business owners should start taking control over the factors that impact their company’s growth, such as credit scores. When owners understand what it takes to get a loan, not only do they thrive, but they help the overall economy grow as well. So, in the end, everybody wins.