As an aspiring entrepreneur, one of the first hurdles to owning your own business will be obtaining a business loan or finding another way to finance your business. For many, this is the most difficult hurdle to get over since financial institutions look over every financial aspect of your life, including your personal credit score. The state of your personal credit score can result in either obtaining a great business loan or being denied. So, why does your person score even matter in business? We’ve listed three major reasons why your personal credit score is a big deal to lenders.
Impacting Your Business’s Credit Score
Financial institutes are in the business of making a profit from your loan. Therefore, they have an interest in your personal credit history. So, when they take a good look at your history and find that your ability to pay back loans or credit cards is less than stellar, they might just reject your request. After all, if you can’t pay back simple credit card debt than how do they expect you to pay back a business loan.
Better Loan Options
Today, business owner hopefuls can find almost anyone to provide them with a loan, whether you get a great deal on your rate may be determined entirely by your personal credit score. A guaranteed loan might sound tempting, but these high rate business loans will no doubt eat up most of your profit. A good credit score can lower interest rates in addition to ensuring that you are approved for the loan in the first place.
It May Blend Into Your Business Credit Score
Say you have an approved business loan, great right? At first, it may seem like a win; however, once you begin applying for business essentials such as phone plans and credit on office furniture, it might come back to haunt you. Often times, when a new business does not have past records of credit, they will then turn to the owner’s personal credit score for reference. This can spell bad news if you’re looking to get the best deals on your essentials.
The bottom line is that in order to begin your journey to business ownership, you must first create a solid foundation for it. This means fixing any issues with your credit score and other areas of your financial life. The better prepared you are, the smoother your journey in business will be.