Getting approved for business lending is not like personal lending. In business lending, there are four main components that you should have dealt with before you apply. Let's take a look at the four.
Leg One - Lender Compliance
There are 20 items that lenders may look at when considering the approval of your business loan application. These items are to determine your risk of default. Is your business a very high risk of default or very low risk? What lenders do is to look at their own default portfolio and the default portfolio of other lenders to see default trends. What they see are trends within these 20 items where businesses who have them all completed are a much lower risk of default versus those who do not have them completed are a much higher risk of default. You want to have them all completed before you apply so your business does not get immediately flagged as a high risk of default.
Leg Two - Owner's Credit
The personal credit of all business owners, anyone owning 15% or more, will come into question as it again speaks to the risk of default. If the business owners all have poor personal credit histories, the lenders will assume that the business will pay its bills poorly too. Anyone owning 15% or more of the business should strive to maintain personal credit scores of 720 or higher. If you are considering applying for business loans and do not have at least a 720 score you should consider getting help to raise your scores before you apply.
Leg Three - Business Credit
To build strong business credit scores your business needs to have at least 10 reporting trade lines that are all showing a positive payment history. We have found that 95% of small businesses have fewer than 3 reporting trade lines and have little to no attention to their business credit scores. In fact, most business owners have no clue as to what their business credit scores are. To optimize your access to all types of business lending, your business credit scores should be 70 or higher with all 3 major business credit reporting agencies.
Leg Four - Finance Programs
This leg of getting approved for business financing involves knowing what each lender and their associated programs require for approval. With over 4,000 business lenders in the United States and each having multiple funding programs this can be a huge task. One way of accomplishing this is to simply ask each prospective lender to review your pre-qualification via soft credit pulls before you actually apply. This will limit your number of credit inquiries which can be damaging if you are not approved. Another way is to run our free business finance pre-qualification scan where we will then match you to the lender and programs you pre-qualify for now and show you what it takes to pre-qualify for all the others.
Inside the Level4Finance business success system, you will have access to step-by-step comprehensive business credit building instruction to obtain everything you need to build and maintain strong business credit scores and to pre-qualify for a spectrum of business loan programs.