Getting approved for funding for your business hinges on your perceived ability to repay the loan or line of credit. It’s crucial to make your application for credit or a loan stand out and show that your business is creditworthy. Here are five practical tips to enhance your business credit application:
1) **Check Your Personal Credit Reports and Scores**
Before applying for credit or a loan, it’s essential to know where your personal credit stands because lenders often evaluate your creditworthiness using personal credit reports and scores. You can obtain your free annual credit report at AnnualCreditReport.com and ensure there are no errors. If you find any mistakes, take steps to correct them. Additionally, you can check your credit scores at MyFICO.
2) **Check Your Business Credit Reports and Scores**
To assess your business credit, you’ll need to request reports from Dun & Bradstreet, Experian Business, and Equifax Small Business. These reports influence not only the approval decision but also the terms of the loan or credit line. If your business isn’t listed with these agencies, lenders will rely solely on personal credit reports. In this case, consider obtaining your D-U-N-S® Number and setting up a company profile with Dun & Bradstreet to give lenders a comprehensive view of your business’s creditworthiness.
3) **Supply Strong Trade References**
An application with robust trade references stands out. Good trade references build confidence in your ability to repay the loan or line of credit. Most business credit applications require three to four trade references. Some suppliers may not report payment history to business credit agencies, so you should gather this information from your own records. Effective trade references are key indicators of your business’s financial health and management. When providing a trade reference, include the company name, address, contact name, and business phone number.
4) **Supply Company Financials**
Your company’s cash flow is critical in determining its ability to repay a loan or line of credit. Prepare your financial documents, such as your most recent profit and loss statement (P&L), cash flow statement (CFS), bank accounts, assets, and investments, before applying for credit. This readiness helps you respond promptly to lender requests and strengthens your application.
5) **Have a Business Plan Document**
Most business loan applications require a business plan. Banks still look for a standard summary of the company, its products, market, team, and financials. The business plan doesn’t need to be extensive—a lean version will suffice. To help you build a business plan, you can use the SBA’s Business Plan Tool, which provides a step-by-step guide.
Before submitting your business credit application, review all the information carefully to ensure you provide as much detail as possible. Above all, be professional, prompt, and responsive to any additional requests from lenders. If your application is rejected, ask for feedback on what factors influenced their decision and how you might improve for future applications.
