Small Business Credit – Know the Procedures Before you Apply

Most people who start and operate a small business expect to work hard for long hours in order to get their business idea off the ground. What they don’t expect is to have to shine their shoes and their personal financial resume in order to get small business credit from their local bank or financial institution. Yet that is the experience of many small business owners who for a variety of reasons need to have loans, lines of credit, or other small business credit in order to keep their business afloat.

The ability to obtain small business credit from a lending institution is directly related to the financial reliability of the small business owner or operator. One of the first things a bank will ask for is proof that the person requesting the small business credit has a good financial standing in the community.

If one has previous bankruptcies, bad debts, or bad loans in their personal financial past, then the bank is usually very reluctant to provide small business credit or financing. Even if they do agree to provide some funding they almost always charge a premium rate of interest and may even demand guarantors or co-signers to the debt arrangement. That’s why it is important to check your credit rating before you head off to the bank for your small business line of credit. There are loan programs available that don’t use your personal credit such as cash advance on merchant accounts and accounts receivable factoring.

There may be errors or omissions on your credit report that you can change or amend before the bank turns down your small business credit application. There may a possibility of contacting former creditors to see if an arrangement can be reached before you even ask your lending institution to look at your commercial credit needs. Even if you can’t change the content of your credit file you can be at least prepared to provide an explanation to the bank as to why they occurred in the past and to give them assurances they will not happen in the future.

A small business credit application may allow you to apply for start up funding to get your business rolling. It may be a small business line of credit that you can use for short term emergencies or tight cash flow months. It may be a business loan that you can use to buy new equipment for your enterprise or to purchase property on which to build your corporate headquarters. Your bank or commercial lender can help you make the right choice of small business credit vehicle to meet your needs for today and tomorrow.

It is hard to break into the world of small business credit, mostly because the risk of small business failure is greatest during the first couple of years of operation. But once you establish yourself in business with a small business line of credit you can rest at little easier and devote your efforts to making your small business a great success.

David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site

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