A Guide to Small Business Loans
There are many types of financing available for small businesses. For example, SBA loans offer incredible interest rates and working capital. There are also business lines of credit, equipment loans, and construction loans. These tools can help in increasing profits and becoming the best. Follow these tips to qualify for amazing small business loans.
1. Take Care of Your Personal Credit
The first thing small business owners need to keep their eyes on is their personal credit reputation. Whether you run a sole proprietorship or a partnership, the way you handle money has a big effect on loan applications. If your personal credit history shows that you’re responsible for purchases, it’s a major point in your favor.
In fact, your private financial records can sometimes be the deciding factor in being approved. If your company has been operating for less than two years, most lenders will look at your personal records when it comes to loan applications. To build great credit, don’t go overboard with credit card purchases and make sure to pay off debts on time.
2. Build Excellent Business Credit
The next step is to give your company a solid credit score. Here are a few suggestions:
- Keep your outstanding debt low: Don’t take out too many loans at the same time. Even if you’re great about making payments, a high amount of debt makes additional financing seem risky. Also, if you have a business line of credit, try to keep the total utilization rate as low as possible.
- Use business financing: Don’t shy away from credit completely. It’s good to apply for a business line of credit, business credit card or equipment lease. That way you can build an amazing reputation for handling credit.
- Pay your bills: When you’re punctual about paying your suppliers, it looks great on your credit report. This should always be a priority.
- Stay up to date with taxes: Many lenders request copies of your last tax returns. Always pay your taxes and keep your business finances organized.
The key to awesome business credit is to minimize debt while showing that you understand how to put capital to good use. This has an excellent effect on interest rates and approval.
3. Check Your Credit Report
Before making an appointment with a lender, prepare by checking your own credit report. You can get an annual copy for free from the three major credit bureaus. If you notice a poor score due to errors, you can contact them to correct the mistake. When you have an excellent credit score, it’s much easier to qualify for any small business loans now and in the future.