Beyond Bad Credit: What Other Factors Determine Whether Entrepreneurs Get a Loan?

If you have bad credit, you may have found that the loans you apply for are expensive or difficult to get approved. However, you are not being judged on your credit score alone. If improving your credit rating seems like an impossible task, then there are other factors you can work on to improve your chance of successful borrowing. Acquiring a loan is an essential step in expanding your business and many entrepreneurs are held back by bad credit ratings. Nearly a third of Americans have bad credit, so you can help yourself stand out with the following Cs, beyond just credit.

Character

While a part of your character will be determined by your borrowing history, it isn’t the be-all-end-all. You can compare company ratings, to see which services are best able to improve your business’s credit score. However, it is just as important to work on your character. Do people generally see you as an entrepreneur of honesty and integrity?

If you’ve had any run ins with accusations of fraudulent or dishonest behavior, then banks will be significantly less likely to trust you. Ensure your peers view you as an honest business owner and banks will be more likely to approve your loan.

 

Capacity

This is your ability as an entrepreneur to generate cash flow. Regardless of your history, if your records show that you are easily producing enough revenue to repay a debt, then banks will be willing to take this into account.

During the underwriting process, banks will assess your risk. A major factor is in how well the business is performing. If you are failing to make a profit, don’t expect a bank to consider you low risk.

 

Collateral

This includes what assets you have. So if your credit rating and cash flow is low, lenders need to determine if there is a safeguard for their investment. This can include commercial property and machinery.

Before expanding your business, try investing in real estate. Once you have tangible assets such as a house, banks will know that they have something they can repossess if you are unable to repay the loan. Of course, never take out a loan if you aren’t sure you can pay it back. Your assets give the lender a guarantee, but should never be used as a form of payment.

Entrepreneurs with bad credit can often feel like they have no hopes of expanding their business. However, there are other assurances you can give to lender. Make sure you work with integrity and back this up with strong accounts and assets to help bankers view you as a low risk investment.

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About Dequiana Jackson

Dequiana Jackson, CEO of Inspired Marketing, Inc., is a small business marketing coach who shows women entrepreneurs how to use solid marketing strategies to turn their life’s passion into a profitable, service-based business. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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