Importance of credit history for business loan approvals

There are multiple factors that can cause a rejection in your loan application. However, the one that is most common is the credit history especially if you are going to traditional financial institutions like banks for business loan. The credit score assesses one’s credibility and their capability in terms of paying off the loan. If you have a low credit score then chances are high that your loan application might get rejected. However, there is a way out! You can always apply for bad credit business loans. 

Financial experts often advise businesses to take steps that would boost their credit score, but that can be a time taking process. If you are in urgency for financing then you can reach out to a finance broker with an application for bad credit financing. They will match you up with the perfect lender and your will get the funds in no time.

Nevertheless, every business owner must be aware of the credit score and what it entails. On that note, hereunder is a brief explanation on the same, with a detailed account of the scores from excellent to poor.

All You Need to Know About Credit History

When applying for business loans, the credit history is one of the first things that the lender checks. You can understand one’s credit history by their credit score. The credit score is the proof of the borrower’s creditworthiness and the past repayment track record. The lender checks it to confirm whether the borrower will be able to repay the loan amount or not.

If you don’t have a good credit score then you can acquire financing for your business probably by putting in collateral or security or get a bad credit business loans.

Factors Considered in Calculation of Credit Score

Creditworthiness is decided by assessing the following factors:

• Repayment history
• Default listings from supplier/lenders
• Credit utilization ratio
• Existing debt
• age of the credit history
• Size of business
• Industry risk factors
• Number of credit enquiries made recently

These are all the essential factors taken into consideration to determine the credit history. 

Understand Your Credit Score

The Equifax score is numbered between 0 and 1200. Refer to the table below for various score bands and their assumptions

Generally, you won’t face any difficulty in getting the loan using traditional methods if your credit score is 600 and more. Loan approval issues arise when the score is below 600 which is average or below average. If your credit history is below average then bad credit business loans are preferable option for financing.

Conclusion

To summarize, it is important for business owners to be aware of their credit history and the overall score before they decide applying for business loans. It saves you the trouble of loan rejection or approval stalling later. Your credit history is important because it is the proof of your ability to repay the loan. The lender, be it a bank or a private lender will assess such aspects before they approve the loan amount. So, we recommend that you keep a tab on enquiries made on your credit file and ensure you don’t allow unnecessary credit checks on your file.

At Broc Finance, we can get a preapproval without running any credit checks on your file. Start your application now and get a preapproval within 24-48 hours.