How Much Does Your Personal Credit Score Affect Your Business Credit Score?
If you are considering business financing, then you’ll probably need to think about your credit score. You may be wondering how your personal credit affects your business credit score. The truth is that if you have bad credit, this isn’t necessarily the end of the line for you. You still have options and it doesn’t mean that you won’t qualify for a business loan. Here is what you need to know.
Why Credit Scores Matter
If you look to a traditional bank for a loan, then your credit will matter. Every lender will have its own requirements. Your credit score reflects how well you manage your finances. Low credit scores indicate that you don’t handle your finances well. However, this doesn’t necessarily mean that lenders won’t look at you.
If you want to apply for a business loan, then your personal credit scores might have the same impact. If you have a lower credit score, you may not receive a traditional bank loan.
How Personal Credit Impacts Business Credit
Your business credit score may be impacted by your personal credit score. If you want a business loan, your personal credit will affect the approval amount. Here is what you don’t want on your personal credit score before you apply for a business loan:
- Unpaid tax liens
- Bankruptcies younger than six months
If there is any sign of fraud, it will affect your approval. If you’re thinking about alternative lenders instead, then you won’t have to worry about debt ratios, balance sheets or anything of that nature. Instead, the lenders will look only at your cash flow. Still, you want to make sure you have a plan before applying for any type of loan.
Traditional and Alternative Lenders
If you have a poor credit score, then you’re going to want to look at an alternative lender. These lenders are especially helpful if you need access to working capital. Merchant cash advances and revenue-based loans can help you. Keep in mind that there are other forms of financing available, even if you have a low credit score. Often, if you have a low personal score, it’s going to affect your business score.
When you are looking into business financing, you want to pay close attention to your credit score. You may think of businesses and yourself as separate entities, but your personal score can still affect your business credit score. It’s best you take care of both.