The Application Process: Credit Score
June 20, 2016
Applying for credit can hinge on one number: the credit score. A high credit score translates into a significantly better chance of being approved. A low credit score means, well, the odds aren’t good.
Applying For Credit
When a small business is getting ready to apply for a loan, the credit score should be one of the main focuses.
Of course, there are a lot of other things to prepare for, including composing a strong business plan, getting financial statements and tax records in order, and filling out the application as to why credit is needed and how it will be used.
The credit score is an integral part of these considerations.
A business plan must take into account the company’s ability to obtain funding and at what rates. A high credit score not only increases the probability of getting credit, it also helps obtain more favorable lending terms.
A company’s credit score is, in part, a reflection of financial performance. A lender will run a credit report on a business in the application process.
This is to determine if the company has been a reliable servicer of their obligations.
The ability to make timely payments shows through in the credit report, and a high credit score reflects financial strength.
Businesses should begin managing their credit report and credit score immediately. This doesn’t mean start working on getting a better credit score during the application process.
A high credit score is achieved over time. Small businesses need to take the necessary steps to build a strong credit profile right away. This way, when the time comes to apply for credit, businesses have a good credit score in their pocket.
Of course, startup small businesses may lack credit history that is needed to earn a high credit score.
Also, other businesses simply might not have all that great a credit score. In the application process, these concerns must be addressed. The reason why the credit score isn’t as good as it should be absolutely has to be explained.
Furthermore, the business must inform the lender what steps are being taken to build and improve the credit profile so that a good score will one day be achieved.