Join millions of Canadians who have already trusted Loans Canada
Apply Now

Without good credit, your chances of growing your business are significantly reduced. Here are some pointers to help you keep your credit on track.

Successfully acquiring a loan often exceeds simply having a well thought out and strategic business plan. Given the economic climate over the last several years, lenders have become increasingly wary as to whom they approve for loans. Good credit has always been perceived as a pivotal factor when applying for loans. Although the success of your business somewhat hinges on good credit, you shouldn’t stop there. There are many ways to make your business as appealing to lenders as possible. Due to current marketplace conditions, banks are seeing numerable volatile portfolios. The businesses that are generally successful at receiving funding are those that have a recognized history of repaying their loans while making profits.

Learn how to successfully identify and avoid predatory small business lenders, here.

Why Business Credit is so Imperative to Small Businesses

Generally, good business credit is considered crucial; however, to the small business owner, it should be considered imperative. What separates small businesses from larger ones is marketplace uncertainty. It is not uncommon for small businesses to see very prosperous months followed by lagging ones. For the slower months, businesses need capital in order to meet operating costs. With a healthy business credit, one can access capital and weather these marketplace uncertainties.

How to Properly Establish and Maintain Healthy Business Credit

This is an all-encompassing credit checklist. Every small business owner and entrepreneur should be well versed in the five ins and outs of good credit.

Capacity

Capacity quite simply refers to your (and your company’s) ability to repay your loans without disregarding deadlines. As we all know, financial history follows us around without fail. This being said, if you have an immaculate repayment record you have already done a great job at putting yourself and your company in a favourable position to receive funds.

As an entrepreneur, it is always important to have a plan. Lenders will not take a risk on your business based exclusively on projections. Providing a lender with historical information, such as repayment records, offers something more concrete and will work in your favour.

Character

When approaching a lender for a loan do not undervalue how your character, skill sets, and general conduct will influence your success in receiving a loan. For example, most lenders will want to make sure you are proficient in the commerce you and your business operate in.

It is not uncommon for someone with a strong portfolio to be declined for a loan based on the premise that they don’t have enough of a professional history in a certain industry. Having experience in an industry, along with strong references, should never be underestimated. These two factors are critical to the process of being approved for a loan.

It is also important to keep in mind that financial conduct in your personal life will be considered a reflection of your professional conduct. Lenders will often look at your personal credit. This being said; treat your personal credit history as you would that of your business (using a personal credit card for business purchases – is it a good idea?). If you have a poor credit history in your personal life, lenders will be skeptical, fearing a similar outcome in your professional life. Settling any personal debts before approaching a new lender for a loan should be considered imperative.

Capital

Don’t forget to invest in your business and show you’ve put your money where your mouth is. If you have invested in your own business, it reflects favourably in the eyes of lenders, by showing your vested interest in your own business. Ideally, you should be able to provide a lender with financial records indicating your own personal investments, along with your experience and success in that industry.

Collateral

Having collateral is a critical condition that you must prepare for if you wish to acquire a loan and build a healthy credit line. What constitutes collateral is very broad. It can be anything from real estate to a company’s purchase orders.

Although that which could be considered collateral is quite broad if it is not considered worthwhile to a lender it will not be considered. From a lenders’ perspective, property is the most desirable form of collateral, your home for example. It’s important to note that considering the current real estate market, a considerable amount of real estate collateral could be lost in equity. If you fall short of collateral assets that would be considered worthwhile to a lender, other forms of collateral would be RRSP’s or stock portfolios.

Conditions

Find a lender that complements your business interests. It is always important to see loans through the lens of a lender. Do some research and specifically target certain lenders. Each lender is different and they often have certain industries to which they prefer to offer loans.

Be careful what lender you choose. Find one that wants to work with you. Once you have chosen, cater your portfolio to the lender’s loan criteria. Although banks can actually be quite selective, there are often similarities between the types of loan portfolios they will accept.

The Ins and Outs to Increasing Your Credit

An important and often overlooked component of assuring good credit is an administrative one. It is important to make sure all credit ranking companies have the correct information in their files concerning your firm. An incorrectly labeled company name or an unrecorded repayment could completely compromise your chances of securing a loan. Do not overlook administrative details.

If you are struggling to secure a loan or have simply been rejected for funding, there are alternate routes that can also be explored, such as peer-to-peer lending. There are many peer-to-peer lending sites that connect those who want to invest money with those who want to borrow money. This financing route will not enable you to finance a huge company, but for the small business owner, it is enough to keep your business headed in the right direction.

Need more information on small business borrowing? Read this article.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2023/06/Speeding-Ticket-in-Canada.png
Which Province Has The Most Expensive Speeding Ticket in Canada?

By Lisa Rennie
Published on June 1, 2023

Slow down and save your money in these provinces. A speeding ticket can cost you your licence, jail time and nearly $3,000 if you speed in...

https://loanscanada.ca/wp-content/uploads/2023/06/Fido-Refer-A-Friend.png
Fido Refer-A-Friend Program

By Lisa Rennie

The Fido Refer-A-Friend program is unique. You can earn up to 5 free months of Fido cell service EVERY year. That is almost 50% off your bill.

https://loanscanada.ca/wp-content/uploads/2023/06/Assessed-value-vs.-market-value.png
Assessed Value vs. Market Value: How Does It Affect Your Home Equity?

By Mortgage Maestro

How do assessed value and market value differ? Find out how your market value and assessed value affects your home equity?

https://loanscanada.ca/wp-content/uploads/2019/11/Home-equity-loan-canada.png
How To Borrow Using Your Home Equity In 2023

By Lisa Rennie

Do you have equity in your home? Find out how you can get a home equity loan in Canada and how much you can borrow.

https://loanscanada.ca/wp-content/uploads/2023/05/Keepa-Review.png
Keepa – Amazon Price Tracker

By Bryan Daly

If you want to shop or sell on Amazon, you need to know about Keepa. Keepa is a browser extension that tracks Amazon prices and

https://loanscanada.ca/wp-content/uploads/2023/05/Used-car-loans.png
Should You Get a Loan for a Used Car?

By Bryan Daly

Used cars loan can help you purchase a car even if you can’t pay it outright. The question is, should you get a loan for a used car?

https://loanscanada.ca/wp-content/uploads/2021/12/Best-Credit-Cards-For-Low-Income-Earners.png
Best Credit Cards For Low Income Earners 2023

By Lisa Rennie

If you're worried about qualifying for a credit card because you have a low income, check out these credit cards for low income requirements and great...

https://loanscanada.ca/wp-content/uploads/2023/05/Credit-memo-canada-.png
Why Did You Recieve A Credit Memo In Canada?

By Bryan Daly

Have you ever received a credit memo in Canada? Wondering why you got it? If you’ve ever returned a product, you may receive a credit memo instead of ...

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card