Underwriting is the process through which a lender determines if your business is creditworthy and should receive the applied for loan. All businesses need capital of some sort to get started, and being able to pass underwriting to receive financing in the form of a business loan is a key step to the success of your business.
The best thing you can do for your business to make sure you can pass underwriting is to get your business credit scores established and in place. Without business credit scores you will more than likely be declined for the commercial loan, and you would be forced to personally guarantee the loan. This is because going after a business loan without business credit scores is the equivalent of attempting to purchase a house or a car with no personal credit history.
Personally guaranteeing a loan limits the amount that can be borrowed, and also puts you and your family’s assets at risks. You can separate your personal credit from your business credit. This means you would not use your social security number to apply for the business loan.
Establishing your business credit scores is important to passing underwriting. You can do this by only taking loans or establishing lines of credit from companies that report your information to the Small Business Financial Exchange (SBFE). There are only a handful of lending institutions out of the thousands available that will report your information to the SBFE. Our Business Finance Coach will show you which companies to open an account with. This will start you in the right direction to establishing your business credit.