638 EXP credit score-will i ever get a loan?

sely

638-EXPERIAN SCORE; 620-EQUIFAX SCORE
Issues related to Layoff in 2002
credit has been clean since 2003
any chance for a small business loan (200,000-225,000)? Or should I not waste my time?
I`ve considered starting a small business account to build business credit but they seem to all hinge on my personal credit. How does this work?
 sely2007-5-14 12:50:57

Nuevolution

First of all, if you think your credit score is bad? why are you considereing using your personal credit to start a business?
What type of business are you trying to start? How much do you need?
Would it be a better idea for you to start your business as a
corporation to avoid using your personal credit to establish the
business?
Having a small business bank account as a sole-proprietor still makes you garantor on the business.
It does not help you establish your businesses credit, who told you that?
Please read the following post it might help you understand the business credit ordeal much better
Tell me what you think

sely

I`m planning to open a cafe ($200K-250K). I would most definately form the business as an Inc or LLC and obtain an EIN...but without buiness credit, wouldn`t they still check my personal credit for the loan?

robertj

Sely,
Most lenders will rely on personal credit information until the business has a track record of it`s own.
Lenders are concerned with
1. Ability to repay the loan
2. Assets that will help ensure that the loan is repaid.
So I suggest that you do a preliminary plan with basic financials before you start looking for a lender.
 

Nuevolution

First of all, How much money do you have saved to bootstrap your business?
Secondly, How much do you know about the CAFE industry? Do you have any background in Managing and running a Cafe?

Do you have any behind the counter experience per say; Seving coffee, latte`s and so forth? If the answer is no?

Why not try working at one to see if you like it or not. Remember a
200K loan is a Huge commitment whether it`s on your personal credit or
business credit.

What if you do get a loan? How are you going to repay the loan? Have
you thought of the what if`s? See Cafe`s are too risky and the banks
know that. How do I know? Because at one point in my life I wanted to
open a Cafe: My plans were to have a Sober Up Friday afterhours joint
where people would come and sober up after a night of drinking (this
was going to take place in Down Town San Jose,CA).
The idea was good. But the Cash Down to start my idea was huge. So I
decided to get a part time at a local Cafe to see what it would be like
to operate one. I quit the first week! Why, Im better at drinking
coffee than serving it.
My point, make sure  that`s what you want to do for as long as it
takes you to repay the loan and for the rest of your life. (if you are
real serious about it)

As for the Business Credit, It would also take some time to build 
the credit, but you can use that as second round funding to push your
business to the next level.
In the mean time why not talk with family members and friends see if
they are willing to help you. But honestly, avoid using your own credit
to fund your business. (how do I know? I made that mistake when I first
started my business) and I had my taste of good and bad experiences
until I incorporated. Now Im working on the Business Credit and
repairing mine at the same time.


Nuevolution2007-5-14 17:58:43

Nuevolution

620 credit score is not that bad. In real estate
mortgage,  a 620 is the cut-off for conventional financing. 
Not sure about small business underwriting, but I would definitely look
further into it.    Good luck.
It`s not!
I seen people with worse credit, Incorporated and are driving BMW 7 series cars.
Although, it`s tough to start business credit, what he needs to do is
see what`s needed to get a business loan, give himself time to fix his
credit rating and then go from there.
In the mean time write a business plan or strategize his business

sely

i do have the experience...i worked and co-managed a cafe for 2 years. i also have several years of management experience in the corporate world. I`m almost finished with my business plan but wanted to see if there was even a chance for a loan before delving all the way in. 
I really have no collateral...i don`t own a home, and asking relatives for loans is not an option.
so what i`m hearing is if i can make a sound case in my business plan...that`s my strongest point. but what about the assets? if i have no assets to back it up, is it still possible to get the loan?

Nuevolution

Well there you go!
You have one thing out of the way. Have you tried grants? Or what about
starting with a small loan at first? 250K is alot to repay. Is that
amount really necessary? or are you adding in a cushion?
Making a sound case (executive summary) is your best bet, most banks,
investors won`t even look past the second page if they don`t seem
interested.

JanetF

Has your credit score been on the rise since 2002 or has it remained basically the same? How proactive have you been in trying to add positive items to your credit report? Is your credit card debt below 30%? Often times, the newer positive items that you manage to add are more important than negative items in the past.
Just from getting a small auto loan and getting a new $5000 credit card to consolidate some of my CC balances on for a debt ratio of less than 25% has raised my score to over 710.
Typically, if you want a good business loan (good - meaning good terms) your personal credit score needs to be at least 680 regardless of if the business has established its own credit or not.
So to answer your question, I assume you theoretically "could" get a loan with a 638 FICO, but it wouldn`t be worth the horrible terms that come with it. I would say your best bet would be to work on improving your credit score before applying for loans. This can be done in a relatively short time if you do your homework no the subject. JanetF2007-5-18 22:42:8

txbassguy

The previous posters are correct - even having a small business account still ties to your personal credit. That`s one myth that`s been spread far and wide through the Internet. From trying to startup a small restaurant here in Houston it is pretty tough. Banks don`t like to lend money for restaurants. I would say 200K would get you through one year of operating expenses.I would do my best to try to save at least 50-100K then go to a bank for the loan and use your savings as collateral. Or try to find a business partner.

jwmoore78

If you are trying to get financing based on your personal credit score alone, a 638 is probably not gonna be enough. I would suggest working on getting that score built up a little bit more and also building a strong business credit score. With the two combined, you should be able to qualify for some financing.