You may not realize just how severely bad credit can affect you until you try to take out a business loan. Only then will you understand the importance of keeping a good credit score. Bad credit can stop you dead in your tracks from trying to build or grow your business.
Generally, a 640+ credit score is one that most lenders are willing to work with. If your score ranges anywhere between 640 and 700 points, it’s considered good but not excellent. In that case, you will usually be eligible to apply for a bank loan or other type of loan. The further your score is below 640, the more difficult it is to borrow money, especially if you’re applying for a business loan.
Here are some ways that a bad credit score can negatively impact you when applying for a business loan.
In some cases, there are minimum requirements to try and get a business loan. Lenders will first take a look at your credit score; if they don’t like what they see, you can be turned down. This could depend on the type of loan you’re looking for and how much money you need. A credit score of 550 or below will seriously cripple your chances of getting a business loan.
Different companies specialize in different types of loans. When seeking a business loan, the financial experts at The Credit Review recommend looking for trusted lenders that help businesses receive loans even if their credit score is weak.
Your best bet is to choose one of the top-ranked companies in the credit industry. You’ll find that the lending companies are ranked based on what they offer, the ease and duration of their application process, their industry accreditation, how long they’ve been in business, and customer reviews and feedback.
Some lenders can see you as a risky borrower, meaning that you’re not considered the ideal candidate to pay back a loan. Bad credit is an indication that you could default on your loan. On a brighter note, it’s important to know that not all lenders utilize the same traditional methods to assess the borrowers.
For some, your credit history can just be one of the aspects they look into but it doesn’t necessarily exclusively determine whether you will be approved for a loan or not.
There’s a price to pay for with a bad credit and that price comes in the form of higher interest rates on loans. The more you borrow and the lower your credit score, the more interest you can expect to pay.
Problems with Vendors
This is an aspect that is usually overlooked, but depending on the nature of your business, it could be hard to buy needed supplies. Some distributors might check your credit score and bad credit could make them wary of selling you supplies.
The importance of your credit score will vary from one lender to another. Fortunately, there are alternatives to traditional lenders that will provide you with a business loan. This will help you manage your business more smoothly.
But at the end of the day, you should always keep your credit score on the higher side to get the loan you want without any complications and eliminate the risk of being turned down.