You know you need to add a working unit to your business, but how much can you borrow? Your business has just start out, and you don’t have a lot of history yet. One big factor that weighs into the decision is your personal credit score. Canadians carry a personal credit score between 300-900 that tell any lending company how you have managed your credit. The higher the score, the better. Any independent non-banking institution like Stride Capital will take a look at your personal credit rating, as it’s a sign of how financially healthy you or your business is.
Here’s what you need to know about how commercial equipment financing companies will use your personal credit history to determined how much you can borrow, and at what rate.
Personal credit can affect commercial financing applications
Many may find this surprising, but yes, your personal credit (and personal debts) are often reviewed with your business lease or loan application. You may need to present tax returns and financial statements from a number of years back.
A personal credit rating can be the one factor to a ‘yes’ or ‘no’
Some direct lenders or banks focus in the ‘subprime’ space (300-700 credit rating) , while others are specifically over 700 (prime space). Depending on the company you apply to, some financial institutions may take a hard line on who they offer funding to or not based on their credit rating cut off. At Stride Capital, we have learned to look at the story behind the numbers, as using a credit rating is only one measure.
Good credit means savings on interest
Individuals and businesses with good credit (normally a score over 700) will typically be quoted lower interest rates, as they have shown they manage their finances well. Businesses that fall below 700 tend to have higher interest rates, as their credit score indicates there has been a history of not repaying debts on time or other issues. As this is risky for any lender, higher interest rates come into play.
Credit ratings can impact lease length and down payments
A credit score not only affects interest rates, but it can also impact other parts of your loans. Direct lenders like Stride will look at how a lease can be setup, to work with a business’ needs. Changing the size of a down payment or how long the lease runs for will also be impacted by a credit score, and a business’ ability to pay.
Your personal credit rating is important to any financial company reviewing your application, and you will want to ensure you start your business in the right place. Begin building up your business credit rating with these 5 tips early, so you find the best terms for your business.
At Stride Capital, we review your credit scores, business history, while we get to know the person behind the business. We crunch the numbers to work out commercial leases that make sense for your business, not strictly based on today, but also looking at where you expect to be. Start a 90-day no obligation quote or get in touch with one of our account managers today.
Stride Capital is here to help you to get into your next piece of gear, with the best financial product for you today and as your business moves forward. Contact us, start your application today or connect with our sales team today to get into the financing you need for you next piece of gear.