If you have a great business idea and you're thinking of applying for a small business loan from a bank, you might want to think again. As reported Bloomberg: “Getting a small business bank loan is never easy, and it’s been especially difficult since the financial crash of 2008 and the lingering credit crunch…it is still virtually impossible to get a loan to open a new business.”
Bloomberg is right! Without a long history of business and a great business credit score, bank loans are nearly impossible to get these days. So how can you get a small business loan when you need it most?
Starting out by building strong business credit will not only help you get a loan, but it will also help you get more favorable terms with vendors and suppliers, pay lower interest in business-issued credit cards, and may even lower your insurance rates and other costs of doing business. Here are 3 tips to help point your business in the right direction:
1. Ensure that vendors and suppliers report your credit worthiness to the credit bureaus.
Many start-up business owners build excellent reputations with their vendors and suppliers when it comes to paying bills on time, every time. However, unless this is reported to the credit bureaus, they will not know about it.
2. Get a DUNS number.
A DUNS number is issued by Dun & Bradstreet, and a PAYDEX score is relied on by many lenders to assess a loan/credit applicant’s credit worthiness. Keep in mind that you don’t have to pay for a DUNS number – it’s free.
3. Keep business and personal expenses separate.
For the first few months of your start-up, you may be obligated to pay certain expenses – like supplier or vendor invoices – with your personal credit card. However, even if you must temporarily use personal credit cards, loans or lines of credit to pay for some business expenses, keep extremely good track of cash flow. Then as soon as you can, transfer all activity to business-only products and accounts.
Getting a Small Business Loan for Your New Business
Even if you diligently follow the above tips, it’ll take years before your bank even considers your small business loan application. Indeed, it’s not uncommon for some banks to demand at least two years of proven, positive credit history before approving a loan – and even then, under highly restrictive terms and conditions. That’s the bad news.
The good news is that you can reach out to alternative lenders like Mulligan Funding! We proudly provide start-ups across the country with the working capital they need to launch their small business dreams. Unlike banks, we only need 2-3 months of credit history, and even a past bankruptcy (if discharged at the time of application) is not necessarily an obstacle.
To learn more, contact the Mulligan Funding team today. Your consultation with us is free, and we’ll gladly answer all of your questions thoroughly and transparently.
For more information on working capital loans and how they help grow your business, download our FREE eBook: