Increase your Business Credit as you Grow

By: Anaya

Very often, the beginning of a business project gets into trouble because of the scarcity of funds. Most businesses start with a limited amount of capital, often contributed by the business adventurers ready to take risks and come out with something new. As the business needs grow, you need to build creditworthiness in the market so that large amount of money can be raised on easy terms.

Business funding is much more complex issue than personal financing. Business owners realise this, and in the initial phases of their ventures, they prefer relying on personal funding by way of loans and overdrafts. But, as the business expands and it becomes more complex, the additional sources of funding have to be explored.

Different types of commercial loan plans available in the UK financial market take care that all the legitimate needs of the business entrepreneurs are met. When you apply for such loans, funding sources look at your personal creditworthiness as well as the business credit profile to determine if loan could be sanctioned or not. Even if a loan is sanctioned, the terms and conditions may differ from lender to lender. If you have an average credit history (say, FICO score of 650) without any business credit profile, you might be sanctioned a business loan of ?100,000 on terms of 13% interest over 10 years. However, had there been a favourable business credit profile, the terms and conditions on the same loan might have been 9% interest over 10 years, offering you a lot more cheaper rate of interest and savings of hundreds of pounds in the process.

FICO credit score, as provided by the Fair Isaac Corp., is the most widely used measure of financial worthiness. It is used by many lenders to check the creditworthiness of homeowners and other consumers who are interested in taking loans. Poor credit record results in bad credit score, forcing you to take bad credit loans instead of regular loans. There are sub-prime lenders in the UK market that deals in loans for people with bad credit. The rate of interest is bound to be high in such cases as the risk involved is more. The lenders have to deal with borrowers, whose creditworthiness is already under the scanner, justifying the high interest charges. Business loans in the UK are available with all the major prime lenders and sub-prime lenders - you need not worry at least on the availability front. Your concern should be to get such loans with minimum interest burden.

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