| Yes, you can buy a business with poor or no credit. | | | | SBA 7(a) require all 3 credit reports. However certain |
| Business acquisitions are a lot easier for borrowers | | | | lines of credit only require one of the bureaus. Most |
| with good credit. There are special considerations | | | | loan officers will have no problem telling you which |
| when improving personal credit specifically for the | | | | credit reporting agencies they use. |
| purposes of buying a business. | | | | 4. Ask your loan officer what other criteria they are |
| One consideration is what type of business financing | | | | looking for - Check with your loan officer what they |
| you are seeking. Are you seeking a loan collateralized | | | | are looking for when lending money for small |
| by your businesses revenues or assets that requires a | | | | businesses or acquisitions. Ask about criteria such as |
| personal guarantee? Maybe you're seeking a line of | | | | debt to income, liquidity ratios, and price to earnings |
| credit for the purposes of expanding your existing | | | | ratios for lending. |
| business? Banks might be more forgiving on giving | | | | 5. Pay down your credit cards when possible - One |
| loans collateralized with assets where a personal | | | | factor that can effect your business purchase will be |
| guarantee is incidental, however if the business does | | | | the debt balance vs. available credit against your credit |
| not have sufficient assets to pay the loan the bank is | | | | cards. High credit card balances can effect your FICO |
| going to look more heavily on the personal guarantee | | | | score, as well as debt to income ratios on the |
| of the borrower. | | | | purchase of the new business. |
| Here are a few tricks that can help you in the credit | | | | 6. Buy NOTHING until after the closing! Too often |
| reporting process. | | | | business buyers have new equipment or cars that |
| 1. Obtain a copy of all 3 bureaus of your credit report - | | | | they buy prior to purchasing the business. There will be |
| You need to know where to start. Get a copy and | | | | plenty of time to purchase things AFTER the business |
| highlight or mark all of the "derogatory" or bad credit. | | | | purchase. Adding more debt to your credit history may |
| 2. Confirm or deny the derogatory report - When | | | | kill your financing of the new business acquisition. |
| consumers have had length of bad income issues they | | | | 7. Beware of cosigning for other people - Cosigning for |
| don't question whether or not the derogatory reports | | | | other people on or before your business acquisition |
| are accurate or not. If some of the derogatory reports | | | | can cause several problems. In today's credit markets |
| are not accurate - challenge them. | | | | more consumers are actually not "cosigning" as much |
| 3. Ask your loan officer which reporting agency or | | | | as they are actually borrowing on behalf of another |
| agencies they use - Certain types of loans such as | | | | party. |