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I don’t think there’s any secret that it’s tough for Main Street business owners to get the financing they need to grow and operate profitable businesses. Most lenders (even non-traditional lenders) look at some of the same things—they might just weight their importance differently. Before you go into the bank, you’ll want to know where you stand with these four very important metric:
Credit score is #1 for a number of reasons. It’s the most important metric and is the cause of most rejections. Although there is hope for business owners with less than stellar credit, those options come with a cost. What’s more, on Main Street, most bankers are just as interested in your personal credit rating as they are in your business rating (sometimes even more). With that in mind, here are a few pointers Liz Weston shares on MSN Money.
“You can’t raise your scores if your finances are still in free fall.” It’s not uncommon for small business owners to rob Peter to pay Paul to keep the doors open. If you’re unable to pay your bills on time, you can’t fix your credit. You’ll likely have to wait until the immediate financial crisis is over before you can attempt any real credit repair. “You can’t raise your score if you don’t use credit.” Although cutting up all your credit cards and paying cash for everything might sound like the best idea, your credit score is a reflection of how well you use credit, not how well you avoid using it. If you stop using credit altogether, your credit reports won’t even generate a credit score. “You don’t have to pay credit card interest to achieve great scores.” Using your credit card is not the same as carrying a balance on the card. The trick is to pay off the balance as soon as the card comes in. Don’t use your credit cards to purchase something you can’t buy otherwise, treat your credit card the same as cash and pay off the balance the instant you get the bill. “You can’t expect overnight results.” If you paid down a substantial portion of your credit card dept today, you might start seeing some results in 30 days, but credit repair takes time and depends on the nature and details of what’s on your report. If you have a lot of negatives like bankruptcies or foreclosures on your report, you’ll have to wait until those drop off. With that in mind, here are a few suggestions to increase your score:
Depending on how bad your score looks today, you might need to invest some time—but there is hope. Just remember, your credit score is the first thing any lender will look at before they offer you a small business loan. Hopefully some of these tips will help you resuscitate a bad credit score.
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Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business financing and trends accessible in common sense language devoid of the jargon.
Blog
4 min read • Aug 11, 2022