The importance of a solid credit rating is becoming even more apparent as getting a small business loan becomes more difficult. Many small business owners may not even know that their companies have credit ratings, and may have been neglecting their credit for years, resulting in loan rejection and financial trouble.
Jeff Stibel, CEO of Credibility Corp., explained to The Associated Press that small business practices changed during the recession, and as a result, so did credit ratings. Companies lowered their costs to save money, and then had fewer bills to pay. It is a common misconception that having fewer accounts to pay each month will improve credit ratings. Instead, Stibel said that fewer recorded payments on a credit file may negatively reflect on a business.
Before applying for a loan, company owners should look into their credit ratings and if necessary, develop a plan to improve their credit. It is of the utmost importance that these owners show they pay their bills on time each month, but for those who hit hard times, a loan rejection might be in their future.
Small business owners who cannot receive loans from traditional lenders, like banks, may want to consult with an alternative lender, like National Funding, a company that can provide them with working capital loans and merchant cash advances.