Don't Let Your Credit Score Affect Your Kelowna Business
Did you know that your credit score can affect your Kelowna business? A personal credit score is a factor in a loan for your business.
Your personal credit score tells your lender how you manage your personal finances. It could also indicate how you manage your business’s finances.
Your lender will consider your ability to repay a loan, should you need one for your Kelowna business, and your credit score will be considered when determining whether you qualify for a loan.
If you own a small business in Kelowna, your Western Financial Group business insurance expert will give you top-notch commercial insurance advice at the right value for you.
Here’s what most lenders want to know when you are applying for a business loan:
- Can you repay a loan?
- Will you repay a loan?
- Will you make all payments even if something unexpected happens?
What are credit scores?
If you are a Kelowna business owner, you can expect that you have a personal credit score and a business credit score. Each is a summary of your credit history and your business’s credit history.
Your credit report is created when you borrow money or apply for credit for the first time. Your lender(s) sends information about your accounts to the Canadian credit reporting agencies, Equifax and TransUnion.
You get points if you use your credit responsibly and you lose points if you have trouble managing your credit. Your personal credit score and business credit score will change over time as your credit reports are updated.
How are credit scores calculated?
Factors that may affect your credit score include:
- How long you’ve had credit
- If you carry a balance on your credit cards
- If you regularly miss payments
- The amount of your outstanding debts
- Being above or close to your credit limit
- The number of recent credit applications
- If your debts have been sent to a collection agency
- Any record of insolvency or bankruptcy
Did you know? Lenders set guidelines on the minimum credit score you need to get a loan.
What is a personal credit score?
A personal credit score represents your credit history and it’s compiled by third-party agencies such as Equifax or TransUnion. It’s your history of repaying your loans and credit card balances and it establishes your score, which can range from a low of 300 to a high of 900.
A credit score of 700 or above is generally considered good. Many consumers have a personal credit score of between 600 and 750.
Remember that your credit score is a record of your financial reliability when it comes to repaying money that you owe.
What is a business credit score?
A business credit score indicates the likelihood that a business will repay its loans on time and not default. So, a business credit score rates the credit worthiness of your Kelowna business for paying back your suppliers and creditors.
Business credit scores use a scale with scores ranging from 1 to 100. The higher the number, the more creditworthy a business is deemed to be. To get a small business loan, your business generally needs a score of about 75.
If you get approval for a business loan with a low business credit score, you can expect to receive a higher interest rate on the amount of money that is borrowed.
Older businesses with a history of financial stability tend to get higher business credit scores than newer businesses.
What is a soft credit check?
A soft credit check looks at the information in your credit report and, most importantly, it does not impact your credit score.
A soft credit check can allow an insurance provider to give you the best price for your insurance. It is a factor that determines the level of discount available to you on your home or car insurance.
Let’s take a look at how your credit score can affect your Kelowna business
Your personal credit score gives your lender insight into how you’re looking after other payments and bills. It’s used as an insight into your ability to repay a business loan.
You can expect that your personal credit score will be a factor every time you apply for a business loan. It can determine what loan you may or may not qualify for as a business owner.
The higher your personal credit score is, the better chance you have for getting a loan approved for your Kelowna business.
A good credit score should also help you qualify for a loan at a lower interest rate.
It’s important to know that business loans can require a personal guarantee, especially if it’s your first time applying for one because it reduces your financial institution’s risk.
It provides your lender with the ability to pursue your personal assets if the business fails and does not have the assets to repay the bank debt.
How to increase your chances of getting a loan with a poor credit score
- Do your best to improve your financial situation.
- Get your personal credit score report and make sure it’s accurate.
- Pay your bills on time.
- Find a guarantor such as a family member or friend who meets your lender’s eligibility criteria.
- Keep your use of credit low: The amount of credit you use is considered a predictor of default risk and it will have a direct impact on your credit score.
- Avoid debt collection and bankruptcy.
- Separate your business credit from your personal credit as much as possible.
- Check your credit report regularly
- Patience: It takes time before your credit will improve significantly.
A solid credit score is an asset for your Kelowna business. It can help you qualify for a loan to expand and grow your business.
You are working hard to build your Kelowna business. Now that you understand more about how your personal credit score can affect your business, you may want to start thinking about how business insurance can protect your business.
Here’s an insurance checklist for your Kelowna small business:
- Do you have the best business insurance rate that suits your work?
- Do you have the right amount for your deductible and regularly review it to make sure it’s the right amount for you?
- Are you or your employees using personal vehicles for work?
What do I do if my Kelowna business has an insurance claim?
- Contact your broker immediately after any business-related mishap. Waiting to file a claim can confuse insurers about the severity of the damages to your business.
- Know your policy so that when you contact your broker you are familiar with what will be covered or not.
- Document the damage. Take photos right away and write down what happened.
- Do not throw away damaged goods after taking photos. Keep the physical evidence so that your adjustor can see it.
- Do not invite lawsuits. Don’t say anything that could be used against you, especially if you aren’t sure what happened.
- Be honest about what your damaged property is worth. Damaged commercial property is generally valued according to its actual cash value or replacement value.
Western Financial Group has licensed BUSINESS INSURANCE EXPERTS to get your Kelowna small business the right commercial insurance package. Our experts are available now to help you navigate the commercial insurance journey to protect your business.
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