Benefits of a Good Credit Rating

At the beginning of the small business loan process, you are either going to have to provide your credit history, or the loan officer at the bank will access it from one of major reporting services. Your credit history is going to play a role in your loan, but how important is it exactly?

If you have a clean credit history, you will likely not have to lose much sleep over getting a business loan. Banks prefer to do business with credit superstars, so a great track record is going to give you a leg up. You will still need to provide a solid business plan to get your loan, but you will start ahead of the game with a terrific credit score.

For those of you who do NOT have a great credit history, the game is not over. While there are many people who are rejected for a business loan because of credit problems, it does not necessarily eliminate you from consideration. By providing strong supporting materials (such as your business plan, or collateral) you can still become a strong candidate to get money from the bank.

The area where credit history REALLY plays a strong role is the rate you will pay on your loan. The higher your credit rating, the lower your interest rate will be. If you have a low credit rating, the bank is going to make you pay a higher percentage for the privilege of borrowing their money.

To avoid paying higher interest rate you might want to do a little work on your credit rating on the front end. Pull your credit report and see if there are any outstanding issues you can resolve. You won't be able to remove bad marks on your credit history for seven years, but you can still chip away at certain issues and perhaps get yourself into a more affordable rate bracket.