What You Should Know About Personal and Business Credit
Many consumers are unaware that they can receive a free credit report every year from AnnualCreditReport.com. Obtaining your report is a great way to monitor your credit score to make sure it’s has high as possible. Your personal credit score, also known as your FICO score, will range between 300 and 850. Interestingly, the Federal Trade Commission has reported that many consumers find errors on their credit report. The good news is that you can have errors removed. As a matter of fact, 20% of consumers who have corrected their credit report experienced an increase in their credit score.
There’s also your business credit report, which is separate and has a range from 0 to 100. If you need to correct errors on your credit reports before applying for small business loans in IL, you’ll need to work with the respective credit bureaus. Experian, TransUnion and Equifax provide information for personal credit reports. However, Dun & Bradstreet, Experian and Equifax provide information for business credit reports. Incidentally, your payment history is heavily weighted when in the loan approval process, so you’ll definitely want to correct any inaccuracies.
The Importance of Understanding Minimum Qualifications
The best way to approach the small business loan application process is with a realization that lending institutions just want to make sure you can repay the loan. Lenders have varying minimum qualifications that must be followed, although online lenders tend to be more lenient and flexible. Once you understand the minimum qualifications, you can boost your chances of loan approval by either meeting or exceeding the minimums detailed by the lender of your choice. Although requirements vary, common requirements involve assessment of your revenue and credit scores. Many lenders also look at how long you’ve been in business, whether you’ve had any delinquencies and if you have ever filed for bankruptcy.
If you’re applying for a loan backed by SBA, then you will need to meet an additional set of requirements beyond what would be customary for other lenders. For example, you’ll probably need to have higher personal and business credit scores.
Gathering Required Documents
Due to technological advancements, these days it’s relatively easy to gather legal and financial documents, which is good since you’ll have to provide them during the process of applying for small business loans in IL. The most common documents required include a copy of your driver’s license, Articles of Incorporation, income tax returns, balance sheet, income statement, bank statements, business licenses and commercial leases. You might also be required to provide a copy of your resume in order to demonstrate your business acumen and management experience.
Providing Your Business Plan
A strong business plan will contain your mission, vision, business practices and much more. Many lenders will request this document in order to assess the strength of your business strategy and whether or not your financial projections demonstrate your ability to increase profits. If you don’t already have a business plan, here are some of the elements that you’ll want to include: Product and/or service description, company overview, management team, sales and marketing strategy, industry analysis and operations plan. You’ll also want to provide a SWOT analysis, which is an acronym for strengths, weaknesses, opportunities and threats.
So what happens if you receive the loan and your business folds down the road? Well, that’s something that the bank consider, which is why they often require collateral. Acceptable collateral may include inventory, real estate or equipment. If you are not interested in providing collateral or simply want another option, you might opt for an unsecured business loan instead.