As a business owner, you may need extra financing at some point. Getting a business loan can be difficult, though, unless your personal credit score is up to par. Even liberal banks may turn you down for a business loan if your credit score is under a certain number. Is your credit score a business loan killer? If so, here are some ideas to raise it.
Lower Your Debt
Your business debt will be a part of the equation when a bank considers your application for a business loan. Of course, you’re allowed to have some debt on your books, but a substantial ratio of debt over income will raise flags in the loan department. Try to pay down outstanding business debt in the form of credit cards or commercial vehicle loans.
Lower Your Unpaid Balances
Does your business routinely keep a high unpaid balance of customer receipts on the books? If so, your business loan application could be negatively impacted. If the bank sees you as a business owner who has a difficult time of getting clients to pay you, they may not approve your loan at all. Try to get your clients to pay their outstanding balances before you apply for your small business loan. Whenever you make collection calls, make sure you adhere to the regulations that oversee this practice.
Don’t Close Open Credit Cards
Once you pay off some of the credit card balances, resist the temptation to close the accounts. Closed credit card accounts show up as closed, but they don’t show up as to who closed them. A loan officer could look at your closed account, and assume that the credit card company closed the account, and not you. If you are fortunate enough to pay one or more of your credit card balances down all the way to zero, just keep the card open. You don’t have to use it, but don’t close the account.