Why You Can’t Get Credit And What You Can Do About It…
In this economy, practically every business could use some additional money. As a business owner you might need it for new equipment leasing/purchasing, to pay off bills or maybe to buy inventory. The problem is that business loans are hard to come by in this tight economy especially with many merchants having less than perfect credit. So what are some of the pitfalls one might encounter when applying for business capital and what can be done to rectify the difficulty?
A major problem is the proportion of credit balance to credit limit that is to say, how much credit/funding your business has been granted and how much you have already used of it. A lender will look at your overall credit limits and compare them to your outstanding balances. This carries a lot of weight in the decision-making process. Your best bet is to keep your balances at or below 50%, 25 – 30% would be ideal. You don’t want to not carry a balance, because you will be tagged as having no credit history. The obvious solution is it to pay down your balances as quickly as possible and keep them at a manageable rate.
Another factor that carries substantial weight in the lending process is that the amount owed on your accounts is “too high”. Confusing? This just means that the debt you are carrying is disproportionately higher than that of other business owners. The problem with this little hiccup is knowing how much debt is “too high”. Again, the one thing you need to do is get those balances down. Eventually, they won’t be “too high”!
A key red flag to lenders is the number of credit application inquiries that are made to credit reporting companies on your behalf. The concern here is that you are desperate for money and are indiscriminately looking for more. Fear not, though, as not all queries are considered as negative to your credit score. Your own reviews or promotional inquiries don’t count against you. Also employer or insurance queries have no effect on your score. The impact of checkups to your report will vary but will probably only affect your scores by about 5 points. If it appears that you have had an excessive number of credit requests or other monetary applications, lay low for a while. Avoid opening new accounts/loans and limit your application period to short bursts of about two weeks (but don’t overdo the apps!).
A biggy on the map in your quest for more funding is delinquency in payment. That will jump off the page that any perspective lender is perusing on your behalf. Timely compensation to lending institutions is a must! If you have been falling behind in your monthly payments, you will need to catch up and quickly, as the longer the history you have of delinquency, the lower you credit score will be and the less the likelihood your business will be granted any loan.
If you are still confused and/or your business is not getting the assistance you need from your bank in the matter, call the Underwriting Specialists at Liberty Capital Group, Inc. who can help you develop a solid plan for your business financial needs.
Contact us @ (888) 511-6223