- Business owners are risking their credit to attain loans for the business.
- Building business credit doesn’t take more time than building financial credit
- If owners understand their business credit and actively manage it, they can find better financing options.
- Online lenders regularly consider several borrower credentials apart from traditional credit reports and scores when funding businesses.
- Financing services like 7 Figures Funding provides startup loans requiring no business credit history to qualify.
There’s already much fear when it comes to starting a new business. Is your product or service better than the competition? Will you lose finances and credit if your business fails? Business owners don’t need more reasons to feel like they are tiptoeing and are always one step away from making the wrong move.
Several online articles discuss business financing myths and spread misinformation about how financing and credit work. These misconceptions continue to cost American entrepreneurs millions every year and, for most, their dream.
Most Americans probably couldn’t tell what a FICO score was a few years ago. But now, millions of users are signing up for products that offer monthly credit scores.
As a result, credit awareness and FICO scores in the US are also increasing on average. The business credit space is poised for an awareness renaissance, but there’s still a way to go.
Unfortunately, business owners are risking their credit to attain loans for the business. Even worse, they are paying a leg and an arm for personally guaranteeing the cash.
But they don’t have to; getting past business financing myths can help you find the best loans for your business. Let’s discuss some of the most common myths to help you steer clear of them when searching for financing options for your new business.
1. It Takes a Long Time to Build Business Credit
One myth that needs to be cleared is that personal credit scores aren’t built faster than business credit scores. No financial institution or consumer lender is required to report your data to any significant credit bureau.
While some financial institutions may prefer to do so to benefit from credit scores, no law mandates it. Utility companies generally don’t report your payment history to the bureaus. This is even when they have alternating data sets that can help millions of American starts building credit.
The same is also true with business credit reporting. Lenders and institutions aren’t required to report tradelines to commercial credit reporting agencies. These are business financing myths that, in reality, require reporting of a few tradelines for generating a business credit score.
Moreover, building business credit doesn’t take more time than building financial credit. However, because of the gap in awareness, many business owners don’t know where to start.
2. Most Business Loans Don’t Consider Your Business Credit
If you think that business loans don’t require a particular business score, you only know half the truth. A small business owners’ report from back in 2016 suggested that only 46% of the owners are satisfied with online lenders.
The broker marketplace relies on business owners that don’t qualify for financing terms and make money off the awareness gap. If the owners understand their business credit and actively manage it, they can open themselves to better financing options. Business owners can guarantee the best loans for their business needs.
The gold standard of business loans – the SBA guaranteed loans, uses FICO small business score services for prescreening applicants. These loans offer the lowest interest rates in business lending. The score combines components from the owner’s personal and business credit data.
However, if you haven’t worked building business credit, you might have to cross the SBA loan off your list of possibilities. Consulting professional business financing services is essential to realize your options before applying for a loan.
3. Business Credit Scores Don’t Reflect on Business’s Creditworthiness
The idea that business credit scores aren’t fair may sound familiar to you as it’s the same complaint with personal scores. Several things may seem unfair about credit scoring. You generally have to use credit to get credit; some items can impact the scores for a decade or more. The algorithms are proprietary, and some small core changes may be hard to rationalize or understand.
4. Are Online Lenders Con Artists?
The online alternative in the lending market is relatively new, and people may still be skeptical about it. Unfortunately, there’s a misconception that online brokers and lenders have engaged in predatory lending practices, which gives the lending industry a bad image.
However, it’s another one of those business financing myths that is far from the truth. In reality, business lenders operating online offer single-digit interest rates. Those who provide higher rates are usually working with risky borrowers.
Online lenders also regularly consider several borrower credentials apart from traditional credit reports and scores. Business owners who get turned down by any financial entity can find the most suitable business financing services online.
5. New Businesses Don’t Qualify?
The startup funding dilemma is a challenging one. Your business needs to be established to secure funding, but you’ll need some cash to get your business off the ground. Moreover, you are required to seek funding from angel investors or venture capitalists.
But is that the only way?
Well, not exactly; it’s another one of those business financing myths that startup entrepreneurs need to realize. More and more business financing services offer startup loans requiring no business credit history to qualify.
However, applying for such loans will involve more scrutiny of your personal finances. Your credit score is essential to the application, and you may get less favorable rates than an established business. But securing a business loan is possible if you stay open to the necessary conditions when finding funding.
Are you looking to improve your credit score within 30 days? Give this article a read.
The system is imperfect, but businesses and credit reporting agencies are constantly working to improve it. If your business’ credit score doesn’t provide lenders predictive modeling, they wouldn’t be used for financing large-sum bank loans.
Behind these major business financing myths, there’s the reality that business owners should know enough about their business credit to take full advantage of it. There’s a need to raise awareness and make life easier for the millions of entrepreneurs pursuing their dreams.
7 Figures Funding provides the best business financing services that will don’t impact your credit. We have helped several new businesses secure funding in Phoenix, AZ. Get in touch today to ensure the best funding options for your business.