If you want to expand your business and is falling short of money, you can easily invest in business loan. But to avail business loan the most important thing is your credit score.
Credit score for business loan reflects your loan repayment history. Business loan credit score ranges from 300 to 900. If you have a credit score of 750 or above, you can easily get business loan. A low credit score for business loan will lead to rejection.
Parameters that affect Credit Score for Business Loan
To have a credit score for business loan you need to keep in mind the following parameters-
- Multiple loan application or rejected loans will reduce credit score for business loan.
- Loan EMI and credit card bill payments must be paid within the time period. Any late payment will reduce credit score for business loan.
- The debt amount must not exceed your income. If the debt amount increases, it will decrease the credit score for business loan.
Features of Business Loan
Here are some of the features of business loan-
- A good credit score for business loan offers attractive interest rates.
- Credit score for business loan must reflect good repayment history of the applicant..
- Minimum documentation is required for a good credit score for business loan.
- Flexible loan repayment option is available.
- A good credit score for business loan enables easy loan disbursement.
Types of Business Loan
A good credit score business loan helps in getting varied kinds of business loan which are explained below-
- Working Capital– If your business is facing a short term cash shortage,then you can opt for Working Capital. This business loan ranges from 6 to 12 months. To take care of your business’s day to day expenses, the working capital loan is the best.
- Equipment Financing– To expand your business by purchasing costly instruments, you can take equipment financing loan. This particular loan is specially designed for manufacturing businesses. Depending on the equipment and credit score for business loan, the upper limit of the loan is decided by the bank. The loan repayment tenure ranges for 4 to 5 years.
- Term Loan– This loan is used for capital expenditure. Based on the credit profile of the business and credit score for business loan, the loan amount is set. Also, the interest rate charged on this loan is quite low. The tenure of term loan ranges from 5 to 20 years.
- Small Business Administration (SBA) Loan- This particular loan is government-backed loan to support small businesses which is provided by private sector lenders SBA Loan is a secured loan and has a low interest rate.
- Lines of Credit– One of the popular business loan type. Small business can opt for line of credit for their cash requirements. A credit line business loan is kind of similar to business card. The interest rate is quite low for this type of business loan.
- Short term Loan– Short term loan is same as term loan but the loan repayment tenure is only 3 to 18 months.
- Invoice Financing– You can opt for this loan with good credit score for business loan when there is a time lag between when the business raises an invoice and when it gets paid. The loan amount is around 85% of the invoice and the rest 15% is the due when the invoice is fully paid. The bank will charge a low interest rate and processing fee for this loan.