Charting the small business loan market can be scary your first time. The best place to start when it comes to finding your first small business loan or credit is not with your banker, accountant or lawyer but with you. The business is the owner so your personal credit history is an important aspect in getting a small business loan.
How good or bad your personal credit history is can influence your ability to get a small business loan. In the wake of big corporate bankruptcies, banks are carefully reviewing all lending practices and trying to mitigate the risks. Before you go into a financial institution for a small business loan, know your credit history.
Check Your Credit First
- Order Your History: Obtain your personal credit history report from the three credit companies; Equifax, Experian and TransUnion. You can also order a triplicate report from one of the companies. You have the option to order by phone, mail or online.
- Know Your History: Check your credit history from the big three credit bureaus for missing data, mistakes and omissions. For example, you may have canceled a $2,000 credit card limit years ago but it can still be on file. The bank will view this as available credit and limit or reject your small business loan.
- Explain Payments: If you can explain a late payment and know why it is on your credit file then offer your bank a reasonable explanation.
Getting a small business loan isn't and a quick and easy process. You need to know your business and your own personal financial situation. Remember, the first step to getting a small business loan is to have a clean credit report.
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