Three Things to Do Before Applying for Credit
If you are thinking of financing new or used capital equipment within the next few months, check your business credit rating now to avoid last-minute surprises. Here's what you should know about credit checks and financing.
2. Get your personal credit score:
Your personal credit score is also used as a tool to evaluate your business creditworthiness. Check your personal credit rating to be sure it is accurate. A personal credit rating or FICO score of 650 or lower can prevent your business from qualifying for a lease or loan.
3. Set aside ample time:
Allocate more time than usual to the credit application process. You will need to supply the make and model of the equipment you intend to purchase, whether it is new or used, and the vendor's name, address and contact information.
Some companies, like Machinery Finance Resources, LLC, will evaluate a standard credit application and deliver a credit decision within 24 hours. If creditworthiness is readily apparent, lease or loan documents are often drawn up and delivered within a day.
However, it is increasingly common for a business to be asked to comply with full underwriting if the initial evaluation uncovers an area of concern. You may be asked to produce two years of financial statements and authorize the release of other relevant financial documents.
What if your business is denied credit? The most important advice is to contact your lender and ask for details. Was your lease or loan declined due to a history of late or overdue vendor payments? Was it declined as a result of a low personal credit score?
Knowing why your business was denied credit is necessary to take corrective action and put your business on the road to better financial health. Of course, your business' borrowing power is likely to improve as the economy improves,