by Maria Nieves, President & CEO, Hudson County Chamber of Commerce
Our mission is to be a leading resource for our Members. We know that access to capital is one of the most critical needs of a small business on the verge of growth. For this month’s newsletter, we researched tips to help our Members who are considering applying for that first loan. Get ready with these 5 tips.
#2A: Build Your Personal Credit Score Lenders will want to look not just at the credit score of your business, but also your personal credit score. Your personal credit score ranges from 300 to 850 (the higher, the better), and evaluates your ability to repay your personal debts, such as credit cards, car loans and a mortgage. The FICO score, commonly used in lending decisions, is based on five factors: your payment history (35% of your score), the amounts owed on credit cards and other debt (30%), how long you’ve had credit (15%), types of credit in use (10%) and recent credit inquiries (10%). You can get a copy of your credit reports for free once a year at AnnualCreditReport.com and dispute any inaccuracies you find through each of the credit bureaus’ websites (Experian, Equifax and TransUnion). If you find any errors, you’ll want to dispute them to improve your credit score.
#2B: Build Your Business Credit Score Forty-five percent of small-business borrowers who are turned down by a creditor are denied because of their credit scores, according to the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia. There are several credit bureaus that collect data and create business credit scores, including Dun & Bradstreet, Experian and Equifax. You’ll want to maintain a score with all three, because a lender can use any of these bureaus to pull your business credit score. You’re also advised to make sure you pay any creditors on time, and borrow loans from lenders that report to credit bureaus. In fact, borrowing a small loan and paying it back on time from such a lender, can help build your business credit score. See this article from Nerd Wallet for more tips on building your business credit score.
#3: Consider a MicroLoan to Start Building Your Business Credit Consider taking a microloan with the Small Business Administration. The SBA offers loans for businesses to purchase new machinery and equipment, or make improvements like landscaping. Additionally, if you need to renovate your existing office or facility, these funds can help. They offer a microloan program that caps amounts at $50,000. Click here to learn more about the SBA. Here in Hudson County, the Hudson County EDC has a microloan program that also caps loan amounts at $50,000. The Hudson EDC Microloan Program offers fixed-rate (5.0% – 9.5%), six-year loans with as little as 10% down for start-up and existing businesses. Businesses in operation for less than two years can borrow a maximum of $35,000; older business with a profitable operating history are eligible for up to $50,000. There are no prepayment penalties. Click here to see their full suite of loan programs.
#4: Get Your Information Together In addition to solid business and personal credit scores, you’ll need solid business plan, a strong personal resume (to prove your credible), a strategic marketing plan, and a P&L statement, which is also known as the income statement. Your P&L statement is a summary of the profit and losses that your business has incurred during a particular time period. Basically, it’s revenue in, less expenses incurred. The SBA has a Business Loan Checklist to help you assemble the needed documents for applying.