Build Business Credit with Bad Personal Credit
Launching your own business often requires personal investments and additional financing. However, proving the creditworthiness of you and your idea to a bank and or a commercial lender might present a difficult task with a bad personal credit history. Although decisions and risk assessments for business loans aren’t solely based on the borrower’s personal credit score, it still plays a major role in establishing a character profile the lenders are looking for.
Therefore, prior to jumping into a new business, you must first review your current financial status, review your outstanding loans and minimize your existing debt. This may take some time and it may require you to reconsider your life style and spending habits. Doing all that will surely have a positive impact on your creditworthiness which makes you a more desirable borrower.
#1 improve your credit profile
A well written business plan is a must for anyone seeking startup financing for a new business; business credit / history is the integral part of securing a loan for an existing business. Lender’s tend to look at the business models and their ability to generate sufficient revenue to cover the debt. If the business model and industry is acceptable to the lender they will proceed to the next step which is usually looking at your personal credit history. Not all lenders will require a perfect credit. Lenders such as the one Getmoney.com works with offer competitive rates with more flexible guidelines than traditional lenders.
Assuming that you qualify for the loan, be sure to make all payments on time. This will help you establish business credit and improve your personal credit. Once you have established sufficient business credit, you most likely won’t have to rely on personal credit for loans in the future.
#2 separate yourself from the business
If you have an existing business, apply for a loan under the business name. Assuming you have assets, you can personally guarantee the loan and usually qualify for a lower interest rate. Some lenders report the personally guaranteed loans to the credit agencies which can help improve your personal credit.