Small Business Financial Help and Your Credit Score
Posted on August 27, 2010
Filed Under Credit, Loans | Leave a Comment
Have you ever felt like your life is centered around that tiny three digit (If it’s not three you’re in real trouble!) number named a credit score? It can find whether you rent a domicile , find a mortgage, go to school, how much interest you pay , or whether you can get small business financial help.
It’s standard that most banks will lend or render small business financial assistance to a business depending on a variety of factors. Cashflow, time in business, personal experience of the owners , past tax returns and personal and business credit scores are all factors . This is all well and good if you have managed to maintain a good or excellent credit score. If however, you have made errors, missed payments, or had to maintain a high balance through an emergency then you will have problems getting financial help from a traditional lender.
Now you may have thought that sounds unjust . The personal finances of a business owner don’t have to indicate the fate of the business. Especially if the business is established and doing ok on its own.
There is actually a migration away from the focus on personal credit in the lending process. This alternative small business financing help may be the solution for a number of small business owners who have been refused by the traditional lenders.
How cash-flow-based commercial loan financing works .
Cash flow based small business financial help usually comes in the form of an advance. For instance merchant cash advance. The lender will purchase your business’ future credit card sales at a somewhat lower amount and advance you the cash. Essentially, if you are expecting to make $10k the lender will purchase that $10k for $8k. You have $8,000 to place in your business and no monthly payments to make. The key to this being a practicable option is of course in the cost. Companies furnishing good small business financial help in the form an MCA will also offer a discount on your credit card processing fees. This will help offset the slightly higher cost of an MCA equated to a bank loan.
Another option are similar too a average loan, except that the lender is more interested with your monthly cash flow, rather than credit. These loans often offer flexible repayment, such as small micropayments taken daily or with each dealing .
Regardless as to whether this is the optimal choice for your small business, it brings up an interesting question about the role of our credit score in our lives. Are these new forms of small business financial assistance an indication of the slow removal of personal credit from business finance, or simply an option to a traditional loan? Only time will tell.
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