When a bank determines what business loan rates it will offer a client, one of the primary characteristics investigated is the history of the borrower.
For new business owners or anyone looking to create a start-up, getting a great rate on commercial real estate loans is often dependent upon business history, which might not exist for some new business owners.
In such cases, the only way to get low rates or even get a loan in the first place is when the business owner puts up his or her own collateral or uses his or her credit history to secure the best business loan.
This reliance upon an individual’s credit for new business loans is why it’s important to have all of one’s financial “ducks” in a row before applying for an SBA loan or any loan connected with a new business.
Business loan rates fluctuate just like the economy, and one of the primary indications of whether a bank will loan an individual money is whether the business will be able to survive the expected fluctuations of the economy.
A few months or even a few quarters of poor sales shouldn’t mean a new business needs to shut its doors. Some type of emergency reserve, collateral, or savings is an essential buffer for any business.