 TITLE: How to Make a Business Plan for a Loan CONTENT: The Importance of Credit When Applying for Business Loans\n---------------------------------------------------------\nPutting up collateral isn't the only way to lower the cost of a business loan. Having good personal and business credit scores can also help you qualify for better loan terms.\nIf you've been in business for a while, your business should have its own business credit score and business credit report, which lenders will review when considering your loan application. Similar to your personal credit history, your business credit history reflects how your business manages debt, and includes information such as on-time payments, collections and bankruptcies. The three major business credit bureaus—Experian, Dun & Bradstreet and Equifax—use data from your vendors, bankers, public records and other sources reported to your business credit history to generate a business credit score.\nIf your business doesn't have a credit history—for example, if it's a startup or relatively new—or if you're a sole proprietor, lenders will rely on your personal credit history and credit score when evaluating your loan application. Even if you have a business credit score, some lenders will want you to personally guarantee the loan, and they'll examine both your personal and your business credit before agreeing to fund you.\nBefore you apply for a business loan, ask the lender which credit scores they consider. Then check your personal credit report and credit score, as well as your business credit report and score, to see how you and your business measure up. Less-than-stellar credit scores won't necessarily rule out a business loan, but you may have to settle for higher interest rates, less favorable terms and less money than if your scores were higher.\nIf you don't need financing immediately, it's worth taking steps to boost your credit scores before you apply for a business loan. You can improve your personal credit score by bringing late accounts current, paying all bills on time, paying down credit card debt and not applying for new credit accounts in the months preceding your application.\nTo improve your business credit, check to make sure your business credit cards and any trade credit accounts with suppliers report to the business credit bureaus. Pay your business's bills on time and work to pay down high revolving credit balances.\nDon't have a business credit history? Establish business credit by setting up a corporation or Limited Liability Company (LLC), getting a federal Employer Identification Number (EIN), opening a business bank account and opening a credit card account in your company's name. Then pay your business's bills on time and make sure that suppliers and business credit card issuers report your payments to at least one major business credit bureau. END