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One of the greatest predicaments when it comes to startups is getting the right funding or loan from banks. According to FICO, a bad credit score, which ranges from 300 to 629 is one of the main reasons why most banks reject a loan application for a startup; additionally, even if your credit score reaches 630 or higher, the bank might decide not to lend financial resources if they deem that one of your credit score factors, such as payment history or amounts owed is not fully satisfactory.
For this reason, one of the most important steps you can take is to think ahead and regularly keep track of your credit score using helpful mobile-friendly applications, as discussed on the CreditRepair.com Review for 2017. Apps enable you to monitor your starting credit score, and even send you updates on your credit repair progress via email and text messages.
Why most banks turn down a loan request for a startup?
Given that new businesses do not have their own line of credit, the bank automatically has to inspect the credit history of the business owner. The reason why banks very often deny startup loan requests lies in the fact that the borrower’s personal credit does not meet the bank’s requirements.
More often than not, a small setback, such as a negative rating on your credit score will actuate the bank to reject the startup loan application. Furthermore, any score that is lower than 800 is highly unlikely to give bankers enough reason to accept the loan application.
Is there a solution?
Improving your credit score is one solution to the problem, however, if you need the money fast, that may be of no help. When banks deny your loan request due to an insufficient credit score, do not get discouraged, for there is hope in the form of online lenders. There are numerous companies that have been established with the aim to help small (startup) business get on the map through providing financial support.
Essentially, when getting financial help online, you are sponsored or funded by an investor, or in some cases, two or more, who get their return depending on the risk they were initially willing to take with your startup. Unlike banks that take into consideration every detail of your credit score, online lenders may simply request an inquiry, which allows them to learn a bit more about your financial history. Furthermore, perks that online lenders might offer include flexible payments, in some cases no fees, and leniency in case you lose your job.
Starting a startup is a rewarding, yet intimidating adventure that only the brave dare to embark on. Getting funding is usually the very first and biggest hurdle a business owner has to face, but with online lenders that should not pose too great of a problem, even with a low credit score.