Does Your Business Credit Score Matter When Applying for a Business Loan?

A credit score for your business starts to form from the moment you create the business, since credit bureaus use public records and financial data to create a preliminary report. Eventually, the business score changes, just like your personal credit score, on the basis of a number of factors. These include payment history, outstanding debt, company size, company age, risk factors in your industry, public records that include bankruptcies and judgements, etc. It goes without saying that the key to your financial life lies in your credit score. As far as business credit scores are concerned, it is usually a number from 1 to 100 that represents the trustworthiness of your business, whether institutions should lend to the business, and how much they can lend. A high score gives the impression to creditors that your business has paid back lenders in a timely manner in the past. Thus, it goes without saying that when it comes to applying for a business loan, the business credit score plays a major role. 
Though the factors constituting business credit score are the same as those that make up personal credit score, the latter is mainly based on public information and is available to anyone willing to pay for it, while the former can be obtained only by yourself. For example, competitors can do some research and check out your credit score. Another chief difference between personal and business credit scores is that the latter does not stick to a single industry standard, they can vary in terms of what algorithms are used. 
Every lender and loan type will pay attention to a different minimum credit score for eligibility of a business loan. Needless to say, every business loan lender will place a different emphasis on your credit score during the underwriting process. So there is no hard and fast rule. Generally speaking, certain types of loans need a much higher business credit score than others. And across the board, one cannot have only the minimum requirements of a small business loan and qualify for the financing he/she is aiming for. Your other credentials such as annual revenue, time in business, investment in your business, etc. need to balance out that minimum credit score. 
While you apply for business loan, you also need to be aware of the fact that if you have a lower credit score, you will be less desirable in terms of loans. You may have to settle for higher interest rates and shorter repayment periods. Having a bad business credit score in the form of default listings, missed or late payments, multiple credit enquiries or just a low credit score can make it really difficult for you to get a business loan approved. That being said, however, it is worth noting that while traditional banks may be stringent about it, alternative financial lenders tend to have more relaxed criteria. You can also apply for a different type of loan or put up business or personal assets as collateral.
When it comes to MSME and SME loans, Bajaj Finserv offers financial assistance for small and medium enterprises. These are accompanied by low business loan interest rate, and the maximum loan value can go up to Rs. 30 lakhs. You can avail of these loans for business growth and expansion and enjoy benefits such as quick processing within 24 hours and minimal documentation.
Does Your Business Credit Score Matter When Applying for a Business Loan? Does Your Business Credit Score Matter When Applying for a Business Loan? Reviewed by Durgesh Thakur on February 15, 2019 Rating: 5

No comments:

Powered by Blogger.