When you’re ready to apply for a business loan, there are many factors you need to be aware of. Applying for a business loan is easy but getting the loan approved can be difficult. While there are plenty of options when it comes to finding a lending institution, it can be hard to know the best way to get a loan.
Business loan applications start by asking for basic information about your business location and your personal details. The lender will want your profit and loss statements, tax records and other documents related to your company. Here’s the part that may be surprising to a lot of small businesses, banks do look into your own personal credit file when you apply for a loan.
It’s common for financial institutions to do a credit file inquiry after you apply for a loan. After all, the lender needs to know whether you’ll be responsible and pay the loan back. Your credit score will play an important factor in the decision to underwrite your business loan. Credit scores reflect your willingness and attitude when it comes to paying back the loan. Your credit history may also be checked in terms of available credit, inquiries, payment history and public records.
New business owners who don’t have the ability to show their profitability will need to have good to excellent credit scores to be considered for a business loan. If your current credit score is low, then now is the time to improve it. Credit scores can be raised by paying on time, having a low debt to available credit ratio and disputing anything that’s wrong or old. To dispute a credit entry contact the credit reporting company that’s showing the error. Each of the three credit bureaus has easy dispute processes to help correct credit records.