Many business owners seeking financing for their business, do not realize that without business credit scores, their business will never obtain significant financing. Business credit scores function exactly like personal credit scores, and so you have to build your business credit scores up properly before you can seek large amounts of capital for your business from any lending institution. It is nearly impossible to obtain capital from a lending institution without having first establishing your business credit scores.
The question that businesses face is how do they go about establishing the business credit scores that will nearly ensure financing for their business. You have to make sure that all of your lines of credit or any aspect of financing for your business reports to the major business credit bureaus. Without them reporting you will never build your business credit scores up to where they need to be. A good place to start is with five vendor lines of credit, three business credit cards, and one business bank loan.
To properly establish credit scores it often times can take three to six months to get a credit score that is worthy of large amounts of financing in the eyes of the lender. A lender wants to make sure that their loan has the chance of being repaid, and one of the only ways they can justify that is to see if you have established a business credit history with a solid score. This is the same concept as when you attempt to get a personal loan or a car loan. They will pull your personal credit history, and if you have a poor credit history or no credit history you are either denied, or are forced to pay higher interest rates on the loans.
One thing to be wary of is business credit building services that claim they will build your credit overnight. They charge exorbitant rates for their services, which will do you no good. A good rule of thumb to live by is that if it sounds to good to be true, than it probably is.
Make sure that as you go along the process of obtaining capital that you never submit a business loan request from a lender that you are not pre-qualified for. Credit inquiries can kill any business credit scores that you already have. Make sure you avoid this practice of submitting a business loan application to multiple sources. Another thing to be cautious of are these businesses that allow you to store your information in one place, and they will automatically submit your loan application and information to hundreds of sources. This is business finance sued, and all you will end up with will be a damaged business credit score and no funding.
Financing your business is not simple, and there are other aspects beyond just credit scores that will get you approved. It is highly recommended that you look into a good business finance coach to help guide you along the way.