How to improve your business’s credit score

Managing money is one of the key tasks of running a small business. Changes in facilities or staff, acquiring inventory, or just the natural ebb and flow of your industry can all affect your cash flow. This is why business loans are commonplace. They play an important role in financial viability. This said, deciding to take a loan—and selecting the institution to take it from — shouldn’t be done lightly. Before you decide, here are five things you should consider.

1. What do you need the loan for?

This is a question to ask yourself, not to justify that decision to take out a loan, but to clarify the best products and terms for your needs.  Once you’ve determined the purpose of your loan you can pinpoint your best option.

2. How much do you need?

While carrying debt is not, in and of itself, a bad business practice, taking as much as you can get is risky. Your debt load can affect everything from day-to-day operations to your credit score, so after you identify what you need the loan for, put a realistic number on your project.

3. How much time do you have?

If you need funding quickly, you’re going to want to work with a lender that’s equipped to meet your timeline. Traditional bank loan applications are cumbersome to complete, and it can take a long time before you’ll have access to the funds. Private lenders simplify their application process and can get your funding, fast—sometimes as soon as 48 hours, however, the rates tend to be higher than with the big banks.

4. Do you need a lump sum or are incremental amounts better?

Your answer to this question will help you decide the type of loan that’s best for you. Traditional banks offer lines of credit where you can take out payments on an as-needed basis, but if you need your money upfront, you’ll probably want to apply for a term loan. This is a loan that granted in a lump sum with regular repayments until the balance is paid.

5. What is your existing debt load?

Before applying for a loan you’ll need to inventory your current debt load. If you’re already carrying debt, you must first calculate how much more you can afford. Taking on debt is normal—but taking on too much debt will put the company in a precarious financial situation. At iCapital, we’ve helped dozens of small business owners make this calculation. It’s surprising how many people apply for additional funding when it would be the business is an extremely precarious position. Ensure that you are on the path to success rather than bankruptcy by doing the math before submitting your financing application.

In the end, selecting the right institution to borrow from, and amount to ask for, comes down to identifying what you need, what you can get approved for, and what you can realistically pay back. With this approach, you’ll be taking on healthy, planned debt rather than putting your company at risk.

It’s the nature of business to need funding on occasion. Renovations, new hires, inventory purchases, and slow days can send business owners in search of a loan. But what if the bank won’t approve you, or you don’t have time to go through their cumbersome application process? Suddenly, “business as usual” is a much bigger, more stressful problem. This is why private lenders are a go-to for Canadian small businesses—they present fewer hurdles and get money into your hands faster. 

Private lenders vs banks

When considering lenders, it’s a mistake to think of banks and nobody else. While banks enjoy name recognition and a reputation for longevity, there are other, modern options. Private lenders like iCapital are an excellent alternative for small business owners, in many cases exceeding what’s on offer from the big banks.

Banks tend to be extremely risk-averse, even refusing to loan to businesses in riskier sectors like restaurants and retail. And, even if they will consider your company, their application processes are onerous and slow, causing an additional time burden while you wait for an answer. Private lenders like iCapital operate very differently. Using a simple, less restrictive, online application, we strive to make the process easy and fast. Applicants can expect their approval within 24 hours and funding the day after. And, private lenders’ standards are less strict and more inclusive, so we lend to more businesses—even people with low credit scores.

What are the different types of business financing?

If you’re approaching a private bank for a business loan, the first decision you’ll want to make is what kind of funding product is best for you and your situation. The three most common funding options are:

• Merchant cash advance - Companies that do a lot of debit or credit transactions might benefit from this kind of lending option because repayment is on a percentage of the day's sales. If your business has a quiet day (or even season), you won’t be stuck trying to come up with repayment while you have no money coming in.
• Term loan - This is a very standard kind of loan where you receive a certain amount of funding and repay a set amount on a set schedule until your loan is discharged. This works well for those who want to know exactly how much they owe and when payments are due.
• Secured loan - With the pledge of an asset, you can take out a secured loan. In general, you can get a better rate with a secured loan, but unsecured loans can be the way to go for small amounts as they are uncomplicated to negotiate. Your decision between secured or unsecured funds will depend on your specific situation.

Taking out a loan shouldn’t be a job in and of itself. If a bank turns you down, or if you need money quickly, consider a private lender. Their faster, simpler application process means you can put your energy where it belongs—back into your business.

Though unlikely, it is possible that you’ve somehow missed the surprising success and sustained popularity of Marie Kondo, the woman who built an empire on the concept of tidying up. Even if you’ve failed to read any of the self-styled organizational guru’s books on the subject or to binge on the Netflix series, you’ve almost certainly heard people using the now-ubiquitous phrase, “spark joy”. In the past several years, we’ve learned to question whether objects, relationships, or even life choices spark joy, and to do away with anything that fails to meet this criterion. One thing is for sure: Marie Kondo has led the way in thinking about decluttering and organization—two real-world ways to improve efficiency. And efficiency, in the business world, is about as joy-sparking as you can get. Read on to learn more about how to Marie Kondo your business processes for a leaner, more cost-efficient organization going into the new year.

Step 1: Start with gratitude

Especially important if you’re working with a team but helpful even for solo ventures, start by acknowledging your strengths and successes. Decluttering should not be an indictment but rather an evolution. There is always room for improvement.

Step 2: Tackle one area or process at a time

Every business has numerous processes to meet their organizational goals, each with its own peculiarities. Although they may be linked, it is better to begin with one and see those changes through before tackling another. If your supporting processes like accounting or recruitment are most inefficient, start there. If the biggest difference would be made with a change in operational processes, that’s the best place to begin. These are changes that will spark the most joy in terms of employee satisfaction, customer service, or even your bottom line. Having a success story from the start will encourage your team to continue..

Step 3: Perform an audit

On her show, Kondo always begins by laying out all of the contents of an area or room in one place. Her thinking is that you can visualize everything and take stock. For your business process, this could be done with your team during a brainstorm session. On a whiteboard, map out the process from start to finish. Consider everything from the employee perspective and from the customer perspective. Next, mark which steps are working well (in green marker), which are satisfactory (yellow), and which need improvement (red).

Step 4: Time to tidy up

Make a plan of attack for the improvements. Determine who will take responsibility for each piece of work. Set a deadline to come back together to gather feedback on the process changes. Working in pairs or teams can make the work go faster.

Organizational clutter is the natural result of work. Over time, processes degenerate or fall behind current knowledge or technologies. Plan for regular clean-ups, whether they’re once a quarter or once per year, and let your joy be sparked by your business’ efficiency, as tidy as Marie Kondo’s famous drawers of perfectly folded clothes.