Many business owners make the terrible mistake of thinking that just because they are in business, they deserve a business loan or line of credit. These business owners will start their business and then instantly try to go out and apply for business financing. Little do they know their business isn't fundable and they are declined, destroying their personal credit score and any opportunity to be approved for business financing in the next several months.
There are several different aspects of creating a business so that it can be fundable in the short-term and in the long-term. Many business owners have a skewed perception of what it means to be fundable. Let's look at some of the items that are needed for your business to be fundable.
Lender Compliant
Lenders are going to review a 20 item checklist to make sure that before they even look at your loan application, your business has a solid corporate foundation. Your corporate foundation consists of your legal business name, proper business phone number, proper business address, state legal filings, and 16 other compliance items. Lenders pretty much want to see that you have taken the time to pay attention to the details.
Strong Business Credit Scores
Your business credit score is just like your personal credit score. If you do not have a good personal credit score you will not be able to buy a house, a car, or anything else that requires a good personal credit score for financing. Your business credit score works the same way. If you do not have a good business credit score with all three business credit reporting agencies, you will most definitely be declined for unsecured business financing.
Business Credit Diversity
Banks and lending institutions want to see that you have a diverse credit profile. Again, just like your personal credit score, your business credit score goes up if you have a combination of reporting business credit cards and reporting vendor lines of credit. If you only have one business credit card and nothing else, a bank or lender will be a bit more hesitant to approve your business for unsecured financing.
Business Credability
Having a strong business credit foundation is one aspect to becoming business fundable, however, being business credable is a different ball game. Business credability is how you present your business to a potential lender or investor. This will tell them whether or not you have a business plan that will entertain debt financing. This has quite a bit to do with your business plan, your executive summary and your financial documents. Ask yourself one question, "Would you lend You money?"
