Your Business Credit Score Is Not the Only Score Financers See

One of the keys to getting started in almost any type of business is having the ability to secure the needed capital to fund your business. If you have a great credit score, most traditional lenders such as banks will probably be happy to review your application for a business loan. A good rating means you have the ability and willingness to pay back your debts. A poor score could mean you are not a very good risk. Banks tend to shy away from anything less than very low-risk situations, so if you don’t have good credit, you will probably need to look into alternative financing.

The number of alternative financers has grown rapidly in the last few years. Finding a lender that does not rely entirely on your credit score is not too difficult. Many lenders today are willing to work with borrowers with lower credit ratings as long as they meet other criteria. One potential factor that can cause you difficulty is having a felony conviction, especially in the area of financial fraud. Overcoming the taint of a felony fraud conviction can be a near impossible task. Oftentimes, in this case, you will need to consider a partner who has a cleaner criminal record.

If your record is fairly clean, but you still have a poor credit score, you might run into trouble if you have one or more bankruptcies that are recent. Lenders tend to view past bankruptcies as increasing the likelihood that you will fall back on filing for bankruptcy again if you start experiencing financial difficulties. Bankruptcies from the distant past probably won’t be a problem as long as you met the demands of the court in discharging your past debts. 

One other potential block to you being able to obtain a business loan with a poor credit score is unresolved tax liens. Tax liens on the property can be a red flag to lenders that you are at risk of losing your business property and defaulting on your business loan. Make sure that any tax liens are cleared up and paid in full for some time before attempting to secure business funding.

The primary point that non-traditional lenders examine when considering you for a loan is your cash flow. Make sure that you have a solid business plan and documentation for how your business makes money and generates profits. Most lenders are happy to consider you for a loan regardless of your credit score if you can prove that you are making money and plan to be in business for the long term.


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