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The Costly Impact Of Poor Credit Scores On Business Loan Applications

Have you had trouble repaying debts in the past? Do you have a number of credit cards that are past due? Have you ever defaulted on a loan? If you’ve answered “yes” to any of these questions, it’s certainly possible you’ve negatively impacted your credit score. Your credit rating plays a crucial role in your ability to secure financing for your business. A poor credit score can significantly impact your chances of getting approved for a business loan from a bank.

 Let’s explore how a low credit score can hinder your company’s financial prospects.

It can limit your financing options.

As your experience has likely shown you, banks rely heavily on credit scores to assess the creditworthiness of loan applicants. A low credit score signals to lenders that you may be a high-risk borrower. This often leads them to deny your loan applications. If you’re lucky enough to get approved, your poor credit rating will likely land you less favourable terms. For example, you would probably face higher interest rates.

Lenders often compensate for the higher risk by charging more in interest. Of course, this increases the overall cost of borrowing. Higher interest can strain your company’s finances. You’ll have to allocate more funds towards loan repayments instead of investing in growth opportunities or day-to-day operations.

“A low score can make it harder to borrow, whether it’s a car loan, mortgage, or credit card account,” explains Daniel Kurt of Investopedia, “And if you do qualify, you’ll likely have to pay higher interest rates to make up for your greater level of default risk. A lot of credit card issuers, for instance, require a credit score that’s either ‘good’ or ‘excellent.’”

You’ll probably get lower loan amounts.

If your poor credit score doesn’t completely prevent you from securing a loan, you will likely receive an amount far lower than you would have liked. Banks generally offer lower loan amounts to businesses with poor credit scores. This means you might not get the funding you need to execute your business plans effectively. Insufficient funds can hinder your ability to purchase necessary equipment, hire skilled employees or expand your product line.

In addition to receiving less money that you asked for, you may also get a shorter loan term. Shorter repayment periods mean higher monthly payments, which can certainly strain your cash flow. In addition, the shorter timeframe may not align with your company’s revenue generation timeline. This makes it a lot more challenging to repay the loan without affecting your operations.

“A low credit score can make it harder to be approved for a business loan or a business credit card at good rates,” affirms Jacqueline DeMarco on, “Even if you can get your hands on a business loan that accepts a low credit score, chances are you’ll receive a lower loan amount and higher interest rates than you’d get with a higher credit score.”

A poor credit score does not impact your ability to get a merchant cash advance!

Regardless of your credit history, you can be approved for Synergy Merchants’ merchant cash advance program in less than 24 hours! To learn all about it, please don’t hesitate to call us at 1-877-718-2026 or email us at You can also apply online for a free, no obligation quote!

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