Lending institutions consider lending for your business a high risk if you are struggling with bad credit or poor sales. The definition of high risk business varies with each leading institution. The most common features are:
Bad credit
If your business or you have bad credit history, then your business is considered to be risky by the lender and most transitional financial institutions would not lend you money.
Poor cash flow
If your company has poor or sporadic cash flow, the lender might consider this as negatively impacting your repayment ability and thus not lend you money. The business owner might use his personal property as collateral and apply for a business loan.
Payment history
If the business owner or the business has filed for bankruptcy or has tax liens; traditional banks do not lend money.
New business
Start up companies, of less than a year to 3 years find it difficult to get their business loans approved by many financial institutions. As they have not yet proved their sustainability, lenders consider them high risk.
In some cases, a business cash advance might be a better option. Business cash advance lending companies usually do not require you to have a business plan, good credit, collateral or financial documents. They are based on future credit card sales. Flexible repayment options are provided; when sales drop, smaller payments can be made and vice versa.
An alternate to the traditional business loan is SBA loans i.e the government covers a large percentage of losses should the borrower fail to repay their SBA loan. If a business can prove that they were unable to acquire a traditional loan, they can apply for one with SBA enhancement.
High-risk assets based lending might prove to be a good option for the borrower owning commercial or personal real estate. The lender uses the asset as collateral and offers loan amount up to 50% of the asset’s equity.
Invoice financing is a type of business to business transaction, where one company sells its 30-90 days unpaid invoices to another company in return for immediate financial help. The factoring company forwards a major percentage of the invoice’s value and charges the borrowing company a fee. The factoring company releases the remaining amount once all the invoices are fully paid.
Small businesses can also lease their equipment to a leasing company for a period of time in return for financing. At the end of the leasing period, the business can purchase the equipment or extend the leasing period. The lender has reduced risk, as the equipment is used as collateral.
There are companies that work on collecting and maintaining credit information of consumers. These are known as credit reporting agencies (CRAs). There are three such major CRAs in the country, namely Equifax, Experian, and TransUnion. Apart from these, there are other smaller-scale agencies too that specialize at the job. If you’re worried about “where to get my credit score?,” the larger CRAs are the most reliable bets.
These major CRAs obtain information from companies that you hold business and transactions with. People or companies that lend you money regularly report to these CRAs on your repaying status. There is also detailed information on the amount you are indebted and whether you have ever defaulted on your payments. Aside from the reports obtained from lenders, these companies also tally your general records based on certain other aspects. Some of these aspects are your public records from the local and state judiciary. These include your tax records and bankruptcy information. This information makes up an important chunk of your credit score and its report.
Equifax
Present in 24 countries, Equifax is an agency that offers consumers protection against identity theft and credit fraudulence. They also sell credit reports and credit monitoring assistance to businesses.
Experian
Experian started off in London and is now a trusted agency in 39 different countries. It provides you with a credit score, credit report, and even credit tracker on subscription. The agency uses FICO 8 system of credit score calculation. Experian was a part of Forbes’ “World’s Most Innovative Companies” in 2018.
TransUnion
Based across 30 countries with a database of over 1 billion consumers, TransUnion is another CRA giant. The agency, like the other ones, will provide you with your credit score and your credit reports. In case you decide to freeze your TransUnion credit report, it will also go the extra mile to notify Equifax and Experian, which frankly is a big help especially in case of identity theft and credit fraud.
So, the next time you are sat wondering “where to get my credit score?,” think of these three giants that provide you with an annual credit score and credit report for free once each year. However, if you are looking for more frequent updates, you can subscribe to their services and receive your monthly updates.
Did you know that you have more than a single credit score? Agencies calculate your credit score based on the data in your credit reports. If you are wondering, “where to get my credit score?,” there are three main credit reporting agencies. These can have different credit scores for you if your information on each of their credit reports is different. Also, these agencies charge a fee to reveal your credit score.
Recently, it has become easier to track and get hold of your credit score without paying any fees. You can get it from your credit card company, your loan provider, and even from a non-profit counselor. Here are a few tips you can use to check your score.