Credit Scores: How They Affect Your Business Financing Options

We all know that our personal credit scores can make a huge difference when apply for financing to purchase a car or a new home. For new and emerging entrepreneurs, credit scores can impact the amount of financing received from loans, the interest on those loans, how big your lines of credit are, and even if you are approved for financing in the first place.

Business Credit Scores

The second you register your business and receive a tax identification number, your organization has a credit record. Much like personal credit scores, your business credit is impacted by debt and outstanding balances. Business owners should look at credit reports regularly to see if there are any red flags, and try to maintain a clean record. Many business owners only look at their credit histories right before they apply for loans, which is too small of a window for any changes to be reflected on the report. If you clear up any debt or outstanding balances, it usually takes about a month for the changes to show on your business credit report.

Business Credit Scores and Financing

Traditional lending channels typically set high thresholds for business credit ratings when entrepreneurs are applying for loans. The reason for this is that small businesses are considered risky, financially. This creates a Catch-22, because businesses are at risk without the proper funding, but low credit ratings – which many new and small businesses have – do not get approvals for loans. Fortunately, there are funding options designed for new and small businesses that are not dependent on credit ratings. Merchant cash advances, for instance, are not structured around credit scores and offer more flexibility than loans without placing debt on the books. There are even unsecured lines of credit for new and small businesses, so entrepreneurs can access capital without putting up collateral. Plus, having access to a line of credit can actually help build business credit ratings.

Low Credit Is Not the End of the Road

At Nanaki Capital, we believe new and small businesses should have a chance to thrive in today’s marketplace without fear of turndowns due to low credit scores. If your business needs funding, and you would like to explore your options, contact the team at Nanaki Capital today.

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