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Can an alternative business loan help my credit or hurt my credit?

An alternative business loan provides you the temporary cash flow you need for your business, it is not recommended to carry an alternative business loan long term because of a higher interest rate compared to a conforming business loan. You are probably seeking a short term alternative business loan for renovation, new inventory, working capital or expansion. Moreover, the better the credit score the better the terms and conditions will be on your alternative business loan. A commercial loan expert should explain alternative business loansare mostly utilized only as short term. Some alternative business loans also have a prepayment penalty, be cautious with an alternative business loan with a prepayment penalty, it will cost you thousands of dollars if you refinance before the terms and conditions on the loan are met. Always select a non prepayment penalty business loan. Your exist strategy for an alternative business loan should consist of the following: 

  1. Personal credit restoration prior to any new business lending or new alternative business lending, it will provide you more flexibility and leverage for any type of lending. 
  2. After personal credit restoration, refinance into a conforming business loan or an Alt A business loan or simply pay off the existing short term alternative business loan with cash.

Furthermore, some alternative business lenders usually require a daily ACH, which may impact your cash flow instead of helping your cash flow. Alternative business lenders require good banking habits like no NSF’s and positive average ledger balances. Lastly, alternative business lending have quicker turn times than traditional business lending and are unsecured unlike an asset based loan. 

Boost Your Business Paydex Score, Experian Business Credit Ranking and Equifax Index Score 

An alternative business loan can help your business credit by reporting a new trade line with Dun and Bradstreet, Experian Business or Equifax Business, basically you are building more business credit or reestablishing your business credit with an alternative business loan. 

A good example: A client had a business partner that neglected his business responsibilities. As a result, some business accounts were not paid and were reported negatively to Dun and Bradstreet, Experian Business and Equifax Business. After my client exited the business partner, he reestablished his business credit with short term alternative business lending to cash flow the business. As a result, my client reestablished his business credit and also obtained a new larger alternative business loan. 

Hurt Your Credit 

While shopping for an alternative business loan, excessive credit inquiries negatively impacts your credit scores, similar to a consumer shopping for a home loan and obtains new credit inquiries which adversely affect the credit scores. Always ask for a business referral instead of shopping for a loan on your own and obtain excessive and unnecessary credit inquiries that will ultimately decrease your credit scores

For more information on how we can help you with your personal credit or business credit  in Boca Raton, Delray Beach and Fort Lauderdale please fill out the online contact form about your concerns or give us a call at 855.477-9007. Read what our valued clients have to say about First Pro Capital and Credit Consulting Professionals on our Testimonials page.

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