Does credit score matter in unsecured business loans?


If you are a business owner, there will be times where you’ll consider getting an unsecured business loan in order to catch up with all your expenses or upgrade your business equipment. No matter what your end goal is, unsecured funding can be a really great source of finance if you need a fast and flexible loan.

However, you might be thinking, ‘does my credit score matter if I apply for an unsecured business loan?’. The short and simple answer is yes, your credit score is, infact, a significant factor in your loan application. As you might have already guessed, a higher credit score will allow you to have a better chance at getting approved, whilst providing you and your business with favourable loan terms and lower interest rates.

It should be noted that even though credit scores are an important factor in securing a business loan, there are other things that are equally as important when lenders evaluate your application. They might include your financial background, your business plan and also your personal guarantee, which you are required to have when you apply for an unsecured business loan. Some lenders will also take into consideration the borrower’s industry and the length of the time they’ve been in business, as well as the general financial situation of the company.

With this in mind, the significance of credit scores in unsecured business funding varies from lender to lender. It’s always advisable to take your time and look for trustworthy business brokers with experience that will offer the best loan for your needs.

If your credit score has suffered a bit lately, there are a few things you can do as a business owner to have a better chance of getting approved for an unsecured loan. Specifically, having a strong business plan can significantly increase the likelihood of getting approved as lenders will be sure you have a clear idea of success and your target market, which will make it easier for you to reach your business KPIs.

This can be combined with a realistic and profitable plan on how you intend to spend the funds in order to grow your business. By giving a detailed finance plan, you’ll be able to show your business’ ability to manage the funds and the financial responsibility in general, which is what lenders want to see from you. Use a 504 loan calculator for a better understanding.

In addition, there are lenders that require a personal guarantee in order to finalise the unsecured business loan application. This serves as a promise from them that you will personally repay the loan in case the business is unable to do so.

Finally, it’s important to understand that while credit scores play an important role in the approval and terms of unsecured business loans, they are not the only factor. As explained, what also matters in the application process is your overall business plan, financial management and revenue potential.

As a business owner, you need to remember that just because you have a low credit score or no collateral, it doesn’t mean you won’t be able to get an unsecured business loan. Aurora Capital has the right team to help your business receive the finance solution it needs in order to grow.

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