Getting financing with so-so credit
It’s a conundrum faced by most aspiring small business owners and many established ones in growth mode: How to secure the financing you need, at terms you can live with, if your credit is only so-so? Or less than so-so?
Options abound, even after excluding the most humiliating ones like asking your longlost rich uncle. The best solution depends on your individual situation, and it almost always involves avoiding traditional banks.
First, a few baseline definitions. Credit scores are calculated by FICO® (Fair, Isaac and Company, named for its founders) based on your borrowing and repayment history, income, expenses and other factors. They measure creditworthiness (the risk of default) for individuals and businesses. For individuals, most FICO scores range between 300 and 850. Bad credit is typically defined as a score between about 300 and 629; Fair
credit: 630 to 689; Good credit: 690 to 719; Excellent: 720 and higher.
Lenders use these scores and other data as a guide to determine whether to lend to you personally and as a small business owner. Beyond a certain point, established businesses are rated separately, and lending decisions are based on the company’s score instead of the owner’s. But for many small- to medium-sized businesses, with dreams bigger than their cash reserves, the cost of financing will be based on your personal score.
Consider these factors if your credit is good or fair:
- • Collateral and/or a worthy co-signer could get you a lower rate. That’s because lenders want some backup if you have problems making payments. Without marketable collateral or a co-signer with established credit, the lender must trust in your say-so that you’ll repay on time. This uncertainty is reflected in the interest.
- Credit cards, though convenient, are expensive. Whether you use a personal card or a business card, rates for cash advances are higher than for purchases. Rates for both are typically higher than you can obtain with some research. And putting a sizable loan on your plastic means there’s less available for operations.
- For established businesses, accounts receivable counts. If all your invoices are getting paid on time like clockwork, good for you. If you have clients who take their time, especially major regular ones, it can pinch. Consider factoring those invoices to improve your cash flow. ECG offers solutions that help you navigate these times.
- Call ECG: We understand the challenges of small business ownership and offer customized solutions, whether your small business has been in operation for over six months or is well established. Over 60% of applications from our businesses get approved. And while personal collateral is an option, we don’t require it. Our simple application process asks for just three months of bank records and/or credit card statements. You’ll receive a quote in 24 hours – and funding in as little as two business days. And our automatic daily payments are both affordable and convenient.
Interested in exploring more about innovative financing options from ECG? Visit us at Expansion Capital Group or call one of our Funding Advisors at (877) 204-9203. We’ll show you how to get the financing you need, at terms you can afford.