The establishment and the growth of a business is supported by a number of factors, of which, finance is the most important. In order to meet the varied needs of a flourishing business, every business house is motivated towards the idea of getting loans. In the earlier days, the businessmen were bound to obtain credit against their private properties. A high amount of risk was involved in it as the successful running of a business is never guaranteed. This high-risk situation gave birth to the term “corporate credit” that became a buzzword in a little time.
Understanding the Concept
The term corporate credit refers to an unsecured loan funded by commercial bodies. The basis of granting this loan is the credit history of the borrower. So, there is no risk involved of loosing personal assets. But, what about a person having a poor credit score? Even the person having a bad credit history can obtain the loan by ensuring the betterment of his business in the near future.
In the following discussion, the various ideas are explored to give fuel to your chance of obtaining a business loan.
• Provide the LLC Status to the Business
It is advantageous to register the business as an LLC. In this way, one helps the company to build its own reputation in the market. The problem with a proprietorship company is that the reliability of the firm is judged from its owner's credibility. Thus, at the time of obtaining a business loan, the poor credit history of the owner becomes an obstacle. On the other hand, the company having LLC status has its own reliability and hence, the process of securing a business loan becomes a smooth ride.
• Make the Business Accessible
The little add-ons like a physical address and a commercial telephone line make the business alive and increase its reach.
• Put the Critical Factors in Place
Don't forget to obtain the most desired lifelines of a business like running license, excellent rating from bank, DUNS number, sufficient number of trade references etc.
• Purchase through trade credit
Trade credit can only be used for the purchase of material. Thus, it is not very flexible in the businesses having distinct requirements of cash.
• Improve the credit score
Providing an LLC status to the organization does benefit the process of obtaining a fair business loan, but the fact could not be denied that a bad credit history of the owner affects the probability of getting a corporate credit. The financial institutes take into account only the owners having a credit score of 640 or above.
The days are gone, when securing a business loan in the situation of bad credit score was a tough job. In the modern time, you just have to think of setting up the business and you will find the corporate loans as the path of making the dream alive.
