Newspaper article Sarasota Herald Tribune

Use Small Business Credit to Fuel Your Growth

Newspaper article Sarasota Herald Tribune

Use Small Business Credit to Fuel Your Growth

Article excerpt

business score card

Obtaining a small business loan or establishing a credit line is not always easy these days.

In my podcast series -- "Been There, Done That, with Dennis Zink" -- I interviewed Ty Kiisel with OnDeck. OnDeck is an online lender providing business loans to small businesses that have been in business for at least one year. They have loaned over $5 billion dollars since 2007. Our interview discusses some challenges that an owner might confront when trying to use debt financing as an option to grow their business.

Zink: Ty, what is the greatest misconception that most small business owners have regarding business credit?

Kiisel: The greatest misconception owners have about business credit is that it actually exists. They are surprised to learn that their business has a business credit profile.

Zink: What do lenders want to see in terms of credit scores?

Kiisel: A traditional bank, for example, wants to see a credit score of 700-ish. However, in some instances, they may drop to 680. If your credit score is below 680, you probably won't find success at a bank. The SBA (U.S. Small Business Administration), however, has a different threshold. If you've got a credit score of 650 or better, you'd probably have success at the SBA. With a credit score below 650, you probably will not find success with the SBA.

Online lenders like OnDeck will work with a borrower who has a slightly lower credit score than that, provided they have a healthy business and can demonstrate that their business is able to repay the loan. Some lenders go as low as a credit score of 500, depending upon the circumstances.

Realistically, if you're a borrower with a credit score of 600, you will likely pay more in interest than you would if you had a credit score of 700. You can't go to the Bank and get a low- interest loan from the SBA or from the bank. Depending upon your credit worthiness, the interest you pay is likely going to be greater.

Zink: In recent years, lenders have been conservative regarding opening the purse-strings to small business loans. Do you think the environment is changing?

Kiisel: From traditional sources, I don't think it has rebounded. However, I think that online lenders and others have made it possible for small business owners to access capital to fuel growth and build healthy businesses. It's a good time for small business owners right now.

Zink: Is it a good idea to establish a line of credit while you can?

Kiisel: If you never access borrowed funds and a situation comes up where this is necessary, you have absolutely no credit profile for a lender to evaluate. Let's say you've been in business for seven years. You have an opportunity to expand to a new location, but you need a million dollars to do it. …

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