How Does Your Personal Credit Affect Business Loan Prospects
If you’re a business owner, does your personal credit affect your business? Does it matter whether your personal credit is bad or excellent? Why should you strive to keep your personal credit in excellent standing if you are planning to start a business? These are the questions we will be answering in this article.
Getting a Business Loan
Why do you need to be concerned about your personal credit history? As you get into business, you may need to acquire some help with your financing needs. Most people start up a business by first getting a bank loan. In this case, your bank or your lender would use your personal credit history as a basis for the approval of your application.
Obviously, if you currently have poor or bad credit history, it’s best to work on improving the status of your credit first before submitting your business loan application. Otherwise, you may just get declined by your lender. Banks and lending companies seek out applicants with good or excellent personal credit history.
What factors in your credit report are lenders most concerned about? Basically, your lender will check on the timeliness of your payments, the status of your debts and see if there are any derogatory marks in your credit report. Occasional delays with your payments may not be of much weight but if there are several late payments or missed payments in your report, it immediately sends off the alarm that you are a high risk borrower.
What if you have a record of bankruptcy in your credit report? If you have been discharged from your bankruptcy, you can include request the credit bureaus to include a letter in your credit report that explains the circumstances why you had to file for bankruptcy. In most cases, banks reject loan applications from borrowers who has a record of bankruptcy within the past three years. However, there are banks that may consider your application so you can opt to give it a try.
Applying for a Business Credit Card
If there’s really no chance for you to obtain a business loan at the moment, business credit cards can help you with your financing needs so you can start your business while still working to improve your personal credit history. For those with bad credit, secured business credit cards are an option as these business cards only require a security deposit to make up for the risk of the applicant.
By keeping up with your business credit card payments, you also build up a credit history for your company. Nevertheless, continue to improve your personal credit history so you can be eligible for business credit cards with better rates and after some time, you can also get the approval for a bank business loan.
Remember, business credit cards are tools in business financing but it is still recommended to acquire traditional methods of business financing such as a bank loan. As your business gains its footing, your personal credit history will play a big role in your future business endeavors.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2008.
Related Article: Borrowing Money To Build Your Business
Click Here for SBA Loan request