Start up business financing is a rather specialized form of financing. Not all banks and financial companies will work with a new business because they are considered high risk. So as a new business owner seeking financing, the first question you should ask your prospective lender is if they finance startup businesses! Don’t start filling out the application until you know for sure!
Many of our clients who find us online have multiple credit inquiries from banks and finance companies that DO NOT finance startups. They should never have filled out the application since all they ended up doing was getting a denial AND having their credit score drop from the multiple inquiries.
Whats The Best Way To Get Approved For Start Up Business Financing
No matter what kind of start up business financing you are seeking, these are the basic pieces of information you will need.
- Financial information
- Business Plan or Executive Summary
Before you submit your equipment lease or small business loan request, make sure you have checked your credit! Don’t wait until you are at the bank to find out there are errors on your credit report. Make sure you pull all three credit reports and all errors have been REMOVED – — not in the process of being removed, but removed completely from your credit report. Telling your equipment leasing broker or small business loan broker that it WILL be fixed won’t be good enough. They can only go with the information provided to them at the point when you apply.
How To Get Your Startup Business Financed If You Have Bad Credit
Keep in mind that equipment leasing is one of the highest rates of approval of all the different forms of business financing. So with a little bit of planning and research, you should be able to obtain an equipment lease despite having bad credit.
First, make sure the leasing company you are working with has a bad credit financing program. If you have credit problems you will need to prove that you are now capable of making your lease or loan payments on time. You need to be upfront about your credit problems. Be ready to submit a letter of explanation with your application. Also be prepared to pay a larger security deposit and higher rates than start-up business owners with good credit. Some finance companies will let you have a co-signer. If so you will just need to find a friend, family member or business partner with good credit to be on the lease or loan with you.
You can also offer additional equipment or property you own as additional collateral.
If you are trying to get approved for a small business loan, keep in mind that not all loan programs are open to bad credit. So again, do your research. Be prepared with a letter of explanation. And be prepared for higher interest rates and security deposits.
After You Get Your Equipment Lease or Loan Approved
Don’t forget to start building your businesses credit. As a start-up business, lenders will be looking at how you handle your personal credit in order to approve you for financing. Once you have that financing in place, it’s up to you to start having these lines of credit reported to the BUSINESS monitoring services. The biggest and most used of these services is Dunn and Bradstreet. Experian and Equifax also have business credit report services. Set up accounts with all 3 and start building your business credit!
Start Up Business Basic Guide – This checklist will help you organize your startup business launch
Liz Roberts has been in the business financing industry for 20+ years. She got her start in banking, went on to consumer and commercial collections and then onward to becoming a senior credit analyst for several small leasing companies. She has also been a freelance writer for 15 years and has written about business and consumer financing on several blogs. She also maintains a low carb living blog.