It's very tough to get a loan for your small business without using yourself to personally guarantee the loan. Especially when you have bad credit. This article discusses ways to help you build credit for your business even if you have bad credit.
More often than not,
business owners neglect on improving their personal credit just because they have a separate account for their business credit. If you are one of these people, you should know that your business credit is not a cover up for your personal credit especially if you have a bad one.
It is true that there are ways on getting business credit with bad personal credit. Having a poor personal credit score would not hinder in building a business credit. However, it will definitely get in the way when it comes to being approved for larger credit lines.
Although lending companies provide their borrowers with options on getting business credit with bad personal credit, most of these companies still check on the personal credit score of borrowers. This is their means of discerning the character of borrowers when it comes to repaying loans.
For instance, if you have a personal credit that reflects your non-payment of financial obligations, a lending company may get the impression that you have no honor in your business commitments as well. Thus, the lending company would deny your application.
As a way of protecting their firms, lending companies only grant business credit to those that are well-structured. On the other hand, it is still the owners running the business who are responsible for making sure that loans are paid on time.
While there are options on getting business credit with bad personal credit, business owners still have to consider their personal credit scores as lending companies and banks differ in approving loans.
More often than not, lending companies ask the officers or managing members of a new corporation or limited liability company as guarantors of their business loans especially if the collateral is insufficient. Thus, the owners or officers of the business should have good or satisfactory personal credit scores in order to represent credibility and reflect responsible fiscal administration. In addition, officers or the managing members of a business with good personal credit scores are often granted with reasonable interest rates as well as flexible repayment schemes. In some cases, they are even granted with lower fees for their loans.
If you are planning to obtain a huge amount of loan from lending companies or banks, it is inevitable for the financial institutions to check on your personal credit. Your personal credit would be the basis of lenders in terms of your character when it comes to repaying large amounts of loans.
In the event that your personal credit score is low or has flaws, you still have ways to improve it as quickly as possible. While you are establishing your business credit, you can make use of a 4- to 6-month time frame in order to improve or resolve your issues with regard to your personal credit.
While you can still obtain a good business credit score in spite of your bad personal credit, it is still better to maintain good or satisfactory credit scores for both your personal and business accounts to avoid any hassle that may arise when applying for large loan amounts.
