Do you know a good credit score, and why does it matter?

Your credit score is from 0 to 1,000, indicating your creditworthiness and your likelihood of repaying debt on time. Most credit scores vary between 300 and 850. The higher the score, the higher the credit rating.

Higher scores can assist you obtain loans for business from traditional banks however private lending institutes do not put the same importance of a credit score when assessing business loans. However, a poor score may make companies reluctant to lend you a loan or charge a higher interest rate. This guide will help you understand what good credit is and why it is important.

What is a good credit score?

Credit scores range from 0 to 1,000 or 1,200 depending on the credit bureau. In any case, the higher the score, the better it is. For your convenience, we have provided the table below to help you understand what good credit is in New Zealand, bureau by bureau.

Credit Score Range	Equifax	Centrix
Excellent	833-1200	846-1100
Good	726-832	769-845
Average	622-725	650-768
Fair	510-621	495-649
Low	0-509	0-494

People with credit scores in the 666 to 755 range are more likely than the average consumer to have a solid credit report in the next year. Good credit is pretty sound and lets lenders know you are not vulnerable to significant financial setbacks and can pay back quickly.

Why is good credit essential?

Credit score and credit report are the two most important variables that traditional lenders consider when evaluating a small business loan application. This information tells them their credibility as borrowers based on their credit history.

Borrowers can increase their bargaining power by taking steps to improve their credit so that they are recognized as low-risk applicants. It means that applicants with lower scores are more likely to get rejected by lending institutes.

If you have a good credit score, you may be able to negotiate the terms of the loan, such as the interest rate, with the traditional bank lenders. You can use the credit report to prove your creditworthiness and claim that you will not be a risky borrower since you have not been so even in the past.

What are the pros of a good credit score?

The advantages of a good credit score are as follows.

1. Lower interest rates on credit cards and loans for business

Interest is one of the costs you pay to borrow money, and the interest rate you get is often tied directly to your credit rating. You will more likely to get the best interest rates if you have good credit. That means lower credit card balances and lower financing fees on loans. The less interest you pay, the faster your debt will be paid, leaving more money for other expenses. The total cost of the loan will significantly come down.

2. Improved bargaining power

Good credit allows you to negotiate lower interest rates on your credit card or business loans if you still need to get the best interest rate. You have to choose from more deals and lenders that can give you more bargaining power. With a good credit score, your options widen. Compare all the arrangements and choose the one that benefits you the most.

3. The higher your credit score, the more likely you are to be approved

Your credit score is dependent on your income and credit history. One of the benefits of a good credit score is that banks are willing to lend you more money because you have proven that you will pay back what you borrowed on time. Your credit report shows that you are a less-risky borrower. So, the lenders will be less-reluctant to lend you a massive sum of money.

4. Increased chances of credit card and small business loan approvals

Borrowers with bad credit histories often refrain from applying for new credit cards or loans because they have been previously declined. A good credit score indeed pushes you closer to approval. It means you can apply for loans and credit cards with more confidence.

5. Easier access to premium credit cards

One of the first things a lender considers before approving a credit card application is the applicant’s creditworthiness. As a result, credit card companies are increasingly inclined to grant such applicants access to premium credit cards that offer better rewards in the form of reward points, cashback, privileged services, etc.

How do you improve your credit score?

Check the credit score, and do not panic if it is not as good as you thought. Each lender has a different rating, and what is considered a “bad rating” for one lender may not apply to another. There is no national “blacklist” of borrowers. If you have a problem with a lender, do some research. You can take specific steps on your own to improve your credit score. These are:

Check your credit history for errors, and continue to check annually. If there is a problem, contact the credit bureau where the problem was submitted to have it corrected. It will affect your creditworthiness. Be careful about

Credit accounts you never applied for
Defaults you did not know
Small business loan applications you rejected

If you need to catch up on loans in the past and can pay now, do so. Once paid, adverse effects are reduced (but not eliminated). If you owe money and cannot pay it off, contact your moneylender. It is better to have a plan and take advantage of every payment than to give up and hurt your credit score.

In the long run, improving credit is more complex but more critical. It would help if you achieved the following goals:

Pay off your current business loan and build a good repayment history.
Take as little debt as possible. Set a budget and save on items instead of using a credit card.
Data is kept on file for a limited period (4 years at the time of writing), so a mistake made ten years ago will not affect your score today.

End words

A score between 726 to 832 is considered to be a good credit score. It comes with many benefits, such as better chances of loans for business approval, low-interest rates, and more negotiating power. Maintaining a healthy credit report and improving your score is achievable if you take the steps discussed here. However you can also obtain a private business loan from private lenders who do not require a good or clean credit score to approve their funding.

Everything You Need To Know Before Applying For Business Loans in New Zealand

For an entrepreneur or business owner, one of the challenging areas for growth is the continuous lookout for a working capital source. Whether you are operating a small or medium-sized firm with relatively limited business collateral or assets, looking for ways to increase funds can be time consuming and challenging. But to raise funds and manage the business, many business owners opt for business loans in New Zealand.

These business finance types can be beneficial to launch a startup or expand an existing venture, with funds often utilized to secure inventory, rent working space, buy equipment, employ staff or cover multiple other expenses. However, small business loans can be difficult for companies to get. But it is not impossible also.
To improve your chances of securing a business loan, you need to know a few things before applying for funding. So, to help you with this, below we have noted some key factors you must consider while applying for a short-term bridging loan or any other kind of funding.

The Working Method of Business Loans

A small business loan works the same way as a home loan. It means when you receive a credit to fund your business, you will have a fixed fee or EMI every month, depending on a particular timeline. Some private business loan lenders might require your real estate assets to be used as loan security, while others offer unsecured options. Aside from this, if you apply to banks, they have firm criteria to meet and the process is very time consuming.

Your Credit Score

Whether you want to take out a short-term bridging loan or any other business finance kind, you must look at your personal and business credit score, as it will make a massive difference while getting the loan approval through traditional banks. It is so because lenders will evaluate your creditworthiness with the help of your credit score. It means they will determine whether you can repay the entire loan amount with applicable interest and other charges or not. So, if your credit score is not up to the mark, you must improve it before applying for a loan. On the other hand with private business loan lenders credit scores are irrelevant.

The Eligibility Criteria

Many borrowers often ignore this, and as a result, they face the frustration of loan application rejection. Before applying for small business loans in NZ, you must look at the eligibility criteria as it varies across lenders. Usually, when you apply for a loan from a lender, some lenders will ask for your detailed business plan, last six months’ balance sheet and bank account statement, business registration details, proposed revenue model, and other crucial details. So, this is something to consider before applying for any business loan.

Loan Terms And Conditions

While applying for a short-term bridging loan or another business loan in NZ, you must carefully go through the loan terms and conditions to avoid future complications. This term varies across lenders. So, if you have not looked at it thoroughly, you may find hidden costs while repaying the loan. After all, as a borrower, you will need to take out a loan that will offer you peace of mind so you can concentrate on expanding your business. Therefore, it is another crucial thing to consider before applying for business loans.

Loan Interest Rate And Other Fees

Interest rate plays a pivotal role in any loan. This is because the interest rate determines whether the loan is profitable or not. So, before applying for business loans in New Zealand, you must look at the interest rate and examine whether you can save some money while repaying the loan or not. Additionally, some lenders will charge extra fees such as loan application fees, penalty charges, early loan repayment charges, and others. Make sure your selected lenders have no such hidden charges before submitting the loan application.

Loan Repayment System

It is another significant thing you should look at before submitting the business loan application to a business loan lender. As each lender has a different loan repayment system, you need to learn about this to avoid future complications while repaying the loan. Some lenders also offer you the option to choose from daily, weekly, and monthly loan repayment systems. So, consider this carefully to repay the loan amount with the applicable charges with ease.

Applying For The Right Amount

Often some borrowers apply for too much amount than they require. As a result, lenders reject their loan applications. So, before applying for any business loan, you must determine how much money you require to get the approval with ease. Besides this, when you take the needed capital, you can use it more productively and repay it without much burden.

Your Cash Flow

Apart from your credit score, if you do not have adequate cash flow, you may have trouble securing the loan. Without sufficient cash flow, you cannot repay the money with ease as well. So, consider this before applying for a business loan.

As you can see, applying for a loan after weighing all the pros and cons will make your business credit-worthy and appealing to lenders. Evaluate all the available choices and always select the business loan lender that offers you the best loan terms and conditions.

Final Verdict

So, this is all you need to know before applying for business loans in New Zealand. Remember that taking the correct business loan type at the right time can save you from a lot of hassle and support you in expanding your dream venture. So, consider all the above things before taking out a loan. Remember that Private funding is a hassle free way to obtain fast funding as the criteria is easier and less restrictive.

Things To Keep In Mind While Applying For Small Business Loans

A lot of things can go on simultaneously in a business. There are sometimes disruptions in the cash flow which could mean business owners cannot meet their needs. The profits generated are not enough to invest in for the company’s growth. Applying for small business loans is one of the ways out of such situations. However, many people struggle with the application process.

We understand finding the best possible loan type out of many available options is a tedious task. It consumes a lot of time that most business owners cannot afford to lose. For those circumstances, this article will prove to be helpful.

What things to keep in mind while applying for loans for business?

We have observed the lending pattern of several business lenders in New Zealand and have learned a lot during the process. You can take advantage of our knowledge. Below we have mentioned some recommendations that will improve your business loan application.

1. Be precise about the purpose of the loan.

What is your purpose for borrowing money? How will you use the borrowed money? The answer to these must be clear in your mind. You can use it to meet many requirements like buying a new piece of equipment, for any cash low issues, paying a tax bill, expanding your business, and many more. There are specific loan types available in the financial market to meet different needs. Also, there are loan types that offer flexibility in usage. You can use the borrowed money for any purpose in your business.

While applying for fast business loans, you will have to let the lender know how and why you want to spend the funds. If it is for purchasing an asset like a vehicle or a piece of equipment, be specific about what you want to buy to make your application stronger. Giving a clear plan on the ways to utilize the funds gives lenders the confidence that their money is safe in your hand.

2. Apply for a small business loan as quickly as possible

Although a sudden need for money is common in a business, working through the irregular company cash flow often forecasts a few future bumps that you might face. Some small businesses regularly depend on borrowed money for the functionality of the business. They borrow money, meet the business needs, and then pay off the loan from the profits gained. Sometimes you might be planning to buy a new asset that will bring new development to your business or thinking of hiring new staff or expanding your business.

Whatever be the purpose of applying for a loan for business, an early application can speed up the process. Though lenders today claim fast approval, an early application will ensure that you are not stuck waiting for a cash injection. Keep the business financials like management accounts updated and ready. Some lenders will ask for these documents, and keeping them handy will enable a speedier outcome.

3. Focus on the details of your company

Lenders are at high risk while giving their money to you. How can they be sure that you will return their money on time? They use several factors to reduce the risk before approving the application. As a fast business loan applicant, you must convince them that you will use the money wisely and can return it on time. You can achieve it with a business plan that you are confident about. Show the lenders that your plan has the potential to maximize the borrowed funds.

The interest rates charged on loans are one way of security to the lenders. Other tactics to reduce the lending risks are documents like your credit history, cash flow statements, bank statements, and more. Keep the business plan, financial forecasts, and tax returns up-to-date. It has been noticed that lenders do not prefer to lend money to a business owner who is not managing their business correctly.

4. Meet all the requirements the first time

While applying for a small business loan, ensure that you provide all the correct information to the lender. Do not overstate your turnover or profits. In business, no one takes your word for it and everything requires proof. There is no point in understating your expenses as all the statements will get verified against the financials, bank statements, or tax returns.

Providing all the information correctly at the first go itself will solve two purposes. One, it will build a trustful relationship between the borrower and the lender. Two, you will have less back and forth during the loan application process. It will, in return, speed up the process of funding approval.

5. Pick loans for the business lender and stick to them.

There are many borrowing options available in the financial market for you to choose from. Although this might seem to be a boon, it can have adverse effects too. It will create confusion amongst the borrowers, and shopping around to get the best deal will also negatively affect the credit score. The credit score is a mandatory check by the lenders to understand the risk. Multiple loan applications within a short duration may signify to the lenders that you are taking out a lot of debt.

End Takeaway

We understand that applying for a fast business loan can be a tedious job to accomplish. Business owners are busy, and so an easy and seamless business loan application is what everyone looks for. These days, several lenders provide online application forms that you can fill out without stepping out of your house. We hope that our recommendations will help you apply for the best loan application for your small business.

What is A Small Business Loan APR And How To Calculate It?

The APR (annual percentage rate) is a significant aspect to take into consideration when applying for any business loan. It affects establishment fees, monthly administration charges, and the total repayment amount. APR represents the total cost of your small business loan on an annual basis. It is vital to calculate the APR of your loan if you are borrowing to fund your company’s overall growth. Keep reading this article to know all about the APR of a loan, and you can calculate it.

What is a small business loan?

Loans needed for business purposes can be taken out through banks, credit unions, and alternative lenders these are known as small business loans. These loans, like other mortgages, come with set terms and can be either secured or unsecured. For a secured loan, you need collateral, whereas unsecured loans get approved through your business turnover.

In the first year of your business, it can be to secure an unsecured loan. It is because lenders ask for proof of revenue to ensure repayment of the borrowed amount. It is difficult for new small businesses. Your chances of securing a business loan will keep getting better as your company establishes strong turnover. Make sure to arrange all your documents in order before applying for any loan at a financial institute. Documents like tax returns, bank account statements, and lease agreements may be required by some lenders.

What is a small business loan APR?

APR stands for the annual percentage rate that a financial institution will charge you when you take out a business loan. It consists of all the fees linked with the money you borrow, including establishment fees and interest. Many business owners check only monthly payments and interest rates while finalizing a loan. However, understanding APR will help you to calculate the loan cost in a better way.

To explain simply, the annual percentage rate or APR is the sum of the business loan interest rate and any other fees associated with your loan. Who should you choose between, a lender with low-interest rates and higher additional set up or ongoing costs or a lender with high-interest rates but no set up or ongoing costs? In many cases, the latter will be more beneficial and inexpensive for you. Comparison between two loans must always be dependent on APR and not just interest rates.

The business loan lender will consider factors like credit history, approved loan amount, loan term, and security offered to determine the APR of your loan. When you review the APR on your loan, remember that it is an annual cost that you will pay while making monthly payments.

Is your APR good for your small business loan?

APR depends partially on your financial history. However, how favorable your APR is dependent significantly on your lender. Consider the below-mentioned factors to determine if you are getting the best APR for your business or not.

Compare all the available lenders for their rates

After you have short-listed a few lenders ready to lend your small business, you must finalize after comparing their rates. You will get an APR quotation depending on your business size and credit history. So, one way to know if your APR is good or not is to compare different quotations.

Consider the monthly costs

A short-term loan with a lower APR is not a good option as it will raise your monthly expenses. The best business loan in New Zealand is the one that your business can afford. Add the monthly loan payments into your business budget to get the right loan.

Conclusion

You must always compare two loans by APRs and not only by the interest rates. Fixed APR is a better option if you are looking for stability in your business budget.