Running a business of your own is a rollercoaster of an experience. When things are going well, you are full of pride and you can revel in your success. When things are not going well, it is easy to blame yourself and feel like a failure.
No matter how things are going with your company, one thing remains the same: it is not easy.
One of the challenges with running a business is getting the capital you need, especially if you have poor credit. Here is what you need to know about getting a business loan in San Diego.
What Credit Score Do You Need to Get a Business Loan in San Diego?
If you need a business loan, it is natural to wonder if you have the credit score to get what you need. As you might expect, there is no single hard-and-fast number that every lender looks for. There are some guidelines you will want to know though.
The General Answer
In general, most lenders look for a credit score of at least 600 before they will approve a business loan.
Of course, that is the bottom line. The higher your credit score is, the better your interest rate will be. A higher credit score may also give you more options for the types of loans you can get.
As we explained, drawing the line at 600 for a business loan is a general estimate. While that is a common requirement, there are plenty of factors that will affect whether your credit score is high enough.
One variable is the type of loan you are trying to acquire. For example, an unsecured loan with no collateral requires the lender to put more trust in you. That may require a higher credit score than 600.
Standards will vary based on the lenders too. Some lenders, especially those with lower interest rates, have higher minimum requirements for loan applicants.
In addition to all this, remember that your credit score is not the only criteria a lender uses when you apply for a loan. They will also look at your assets, your current financials, and other factors. The better you look in those other ways, the more likely you are to get a loan with a low credit score.
How to Improve Your Chances of Getting a Business Loan
Let’s say your credit score is lower than you would like it to be. You still want to get the best possible loan and interest rate. Fortunately, there are plenty of ways to give yourself a better chance of success.
As we mentioned, not all lenders are equal. It is similar to applying for colleges; your SAT score could be fantastic by one university’s standards but at Harvard, it might be far too low.
If your credit score is poor, look for lenders that specialize in business loans for people with low credit.
At the same time, do not assume that your credit score makes you desperate. You do not need to take the first loan you can qualify for if it has expensive terms.
Shop around and see what different lenders have to offer. Keep in mind though, that it is better to request a prequalification than to actually apply for several loans. Lenders will see that you have multiple recent loan applications, and this may look like you are applying for more credit than you can afford.
Make no mistake—your credit score is important when you are applying for a business loan. It is not the only criteria the lender will examine though.
The more concrete information you have about your business, the better.
Have a detailed and defined business plan and demonstrate that you are on track. Bring financial data about your company’s success. Have an established plan for how you will spend the money from the loan, including estimates and documentation if possible.
The more information you have to make yourself an appealing borrower, the less your credit score will matter.
Find Fast Ways to Improve Your Credit
There are many factors that affect your credit score, and many of them can take months or years to improve. There are some things you can do to improve your credit in a short period of time though.
One option is to pay off all or most of your revolving credit: your credit card debt. It may be worth getting a personal loan to pay off the balance. Owing money on a loan does not hurt your credit the way it does when you owe money on a credit card.
Another possible option is called credit card piggybacking. If you have someone close to you who has a credit card with a great payment history, they can add you as an authorized user. That credit card’s good history goes onto your credit report, raising your overall performance.
Consider Options With Collateral
When you are looking for a business loan, an unsecured loan is usually desirable. When there is no collateral, the lender cannot seize that collateral if you struggle with your payments.
At the same time, if your credit score is low, secured loans will be easier to get. When it comes to your business, you may be able to use your business’s equipment or other assets as collateral.
If you are using the money to buy equipment, you could cut out the middle man and look for direct equipment financing instead.
Getting the Capital Your Business Needs
Every business has its ups and downs, windfalls, and unexpected expenses. Whether you are trying to grow or to sustain your business through a dry spell, a business loan in San Diego can be the perfect solution.
The tips and insights above can help you get the capital you need, even if your credit score is less than stellar.
To start your loan search today, apply for a business loan with us online.
Combining a high level of personalized service with a cutting-edge lending platform, Formula Funding delivers an unparalleled banking alternative. We offer a fast and efficient option to get your business the critical funding it needs without the red tape. We work with all credit grades, tax liens, judgments, and charge-offs – something unheard of at a traditional bank. Since 2010 over 15,000 small business owners have used our funding sources to grow and expand.