Has your small business been turned down by the banks for financing? If so, do you know why you were turned down? Many small business owners do not know the reason, and unlike with personal credit, lenders are not required to explain to businesses why they were denied funding. What many business owners may not realize is that the decision on whether to lend money often depends upon your business credit score. Did you even know that you had a business credit score? Many people do not. Freedom Debt Relief reviews the top factors that can impact funding for your small business.
The FICO Small Business Scoring System (SBSS)
Every small business has a FICO score, just like every consumer has a personal credit score. This score is used to determine if your business can qualify for loans or lines of credit up to $1 million. Your company’s score is ranked by its likelihood to make payments on time. This ranking is determined by both your personal and business credit history, plus other financial data. Freedom Debt Relief reviews reveal that the score can range from 0 to 300. To prequalify for a Small Business Administration (SBA) loan, you must have a score of at least 140.
If your score falls below this number, or your business doesn’t have any credit yet, there’s a good chance you will be turned down for funding by the banks. In fact, Freedom Debt Relief reviews of applicants show that approximately 20 percent of them are turned down for loans. And of those 20 percent, approximately 45 percent have been turned down more than once. Another 45 percent of small business owners did not even realize that they had a business FICO score.
How to Improve Your Score
The first step to improving your score is to become educated about it. You can read more about the FICO SBSS on their website, and you can even request a copy of your own score. Freedom Debt Relief reviews show that you can purchase your business FICO score through one of the business credit bureaus such as Dunn & Bradstreet, Equifax, or Experian. If your company’s FICO is lower than you’d like, then you should evaluate your business and look for ways to bring your score up.
Making on-time payments to vendors and suppliers could help increase your score. Also, examine your current debt. Are you using your current credit to keep the business afloat? This could be a vicious cycle. Let’s say you don’t get the funding you need and, so you charge resources or supplies on your business or personal credit card. You feel like you must do this to keep things running. However, if you use too much of your available credit, it can impact your score and hinder your chance of a small business loan even further.
A recent survey shows that 62 percent of small business owners who needed funds ended up withdrawing them from personal savings. Only 36 percent of those who needed funds had received a loan from a bank.
While this may sound bleak, it is not all bad news. Freedom Debt Relief reviews reports that business owners who are aware of this score and how to manage their company credit are 41 percent more likely to get the funding they need. So, knowing where you stand is the first step to securing funds. Depending on your situation, there may be some work involved. However, as long as you know where your deficits are, you can work to improve them.