If you apply for a small business loan and are denied, you won’t be alone. One of the most common reasons for being declined for such a loan is a low credit score, whether it is your personal or business credit score. Even if you are not denied, you could be subject to higher insurance premiums and interest rates.
Fortunately, you can build your credit. Once you do, you will likely find it easier to get financing in the future.
Be Timely with Payments
Making payments on time is integral to repairing your business credit score. Each of the credit bureaus implements different ways to determine credit scores, but they all consider your payment history when doing so. Make payments to creditors on time, and pay them early whenever possible. Another benefit of doing this is that you will avoid a lien or bankruptcy on your record, which can have a major effect on your ability to get a traditional loan.
You should also use your credit lines to build credit. You don’t need to max them out, but do use them regularly to demonstrate your timely payment habits.
Look for the Right Creditors
Be sure to borrow from creditors that report to credit bureaus. Before you apply for a loan, ask the lender if they report this information to the credit bureaus. If they don’t, try to find a different lender.
Establish Vendor Lines of Credit
Another way to build your business credit score is to establish accounts payable with various vendors. Request to do this with vendors you buy from, but first, ensure that they will report these lines of credit to the credit bureaus.
No matter how low your business credit score might be, you can improve it over time. If you need financing but don’t qualify for a conventional loan, contact IRC Commercial Lending for alternative options.