Borrowing loans to fund a business won’t be a walk in the park for many who have terrible credit history. Also, even those with positive history will need to reach certain credit rating benchmarks to qualify them to assess business loans. In situations where the borrower doubts your capacity to pay off your debt, he will opt to offer loans with a guarantor. Financial houses are keen on credit scores when giving out loans because it reflects to the lender, how well you can handle money and repay your loan. However, it is not impossible for persons with low credit scores to obtain loans.
BUSINESS CREDIT RATING
Checking business credit scores is an integral part of analyzing the credibility of businesses, proving to be a major deciding factor for being eligible for business loan application. These credit scores are calculated by credit bureaus and they factor your payment history, credit history, card utilization, tax liens and bankruptcies amongst other requirements to come up with a score. Applying for bad credit guarantor loans become imperative when these scores become lesser than average. There are two kinds of business credit rating; personal credit score and business credit score.
PERSONAL CREDIT SCORES
These scores range from 300-850 and denote a person’s credit worthiness. When applying for business loans, the number of years spent in business is usually an important factor being considered by the lender, as experience in the field boosts lender confidence. This makes it quite hard for startups to source loans as there is usually no business credit history or the challenges of startup businesses must have hit the business badly, handing it a bad credit score. In this case, personal credit scores can come in handy as they represent financial accountability over the years. Some of the loans accessible will be guarantor loans, which will need a guarantor in the underwriting process. Having a credit rating of 650-700 puts you in a good position of finding a lender.
BUSINESS CREDIT SCORES
Business credit scores work for businesses same way as personal credit scores for individuals. The rating is from 0-100 according to SBA and factors that determine this score include how often you pay your bills, your suppliers and credit available. Possessing a business credit score of 70-75 is ideal for securing business loans, any score below that will tighten the chances. If you have any score below 55, then it is better to source for bad credit guarantor loans from local banks.
700+ credit score: This put you in the radar of many borrowers because of their belief in your capacity to repay.
650+ credit score: With this credit rating, you are still within the radar for bank loans and most favoured for SBA Loans
600+:This could qualify for a medium-term loan.
550+: This could qualify for a short-term loan, or maybe a medium-term loan if your business is especially strong. This seems to be the benchmark for many lenders. Below here, it is extremely difficult yo assess loan facilities.
550+ and below: You will have a very difficult time accessing loans. In this case, you will have to be on the lokout for bad credit guarantor loans and will have a lot of explanation to make to convince your borrower.
No lender wants to give out bad loans , hence their confidence is hinged on the credit score because it reveals the financial prowess of the loan seeker. Possessing a bad credit profile doesn’t rule out the possibility of finding a loan facility but makes it tougher because of the stiff competition. Embracing loans with a guarantor, may be the answer.
Check out this post for more informations: http://www.sasrules.org/bad-credit-right-loan/