How to Handle Poor Personal Credit Scores When Applying for a Business Loan

When you come to us for a business loan, it is true that we will do everything in our power to help you get the most funding possible for you. But what happens when it all comes down to your personal credit score? This is something we see a lot of first-time business owners scratching their heads about, especially when applying for a start-up loan from us. 

So what do you need to know? Let’s take a look at how your personal credit score will affect the types of business loans you would be approved for, how much you will get, and so on. Keep in mind that our team of highly trained professionals can give you more one-on-one advice on our phone calls, and we have networks of professionals to help get your personal credit score back on track!

Credit is Important for Business Loan Approval

When you are applying for a business loan, lenders are going to take a detailed look at your credit history to determine the risk involved in providing you with financing. Your credit history shows lenders how well you manage your debts and whether you make payments on time, and it also reports how much money you have borrowed in the past and whether you have ever declared bankruptcy. These factors can tell a lender a lot about the risk they’ll take on if they offer you a loan.

How Often Do Lenders Look at Your Personal Credit Score for a Business Loan?

Most lenders will at least look at your personal credit history when determining your eligibility for a business loan. However, some lenders will put less weight in your personal score than others, which is why you shouldn’t give up on applying for a start-up loan or a business loan. If you already have an established history of good business credit, lenders may put even less weight on a lower personal credit score.

In the following circumstances, you can generally expect your personal credit to matter more for a business loan:

1. Applying for Financing With a Bank or Other Traditional Lender

Banks have strict requirements for lending and don’t have the luxury of being very flexible. On the other hand, Unsecured Finances can help your business to navigate this process to find the best options and how to prepare your application. 

2. Your Company Is a Start-Up or a Small Business

If lenders don’t have enough information to determine your creditworthiness from your business score, they will weigh your personal score more heavily. If you own a sole proprietorship or a small business with only a few employees, it may be hard for a traditional lender to see the distinction between your business’ credit history and your personal credit.

3. Low Personal Credit Score

A few older negative items on your personal credit report shouldn’t make it difficult to receive a business loan, especially if your business’ credit history is strong. However, the more negative items there are on your personal credit history, the more a lender is going to take notice and factor it into their risk assessment.

What Effects Will My Personal Credit Have on My Business?

Your credit history—both personal and business—is only one factor lenders use to evaluate your application, not the be-all and end-all of the financing process. However, credit history is an important factor, and it can have a variety of effects on your ability to acquire the financing you need. Your business and personal credit histories can affect:

  • Whether or not you get approved for a loan
  • Your options for terms and payment schedules
  • The interest rate on your loan
  • The total amount of financing that lenders are willing to provide

What if I Have a Valid Reason for Having Poor Personal Credit?

Independent financing partners have much more flexibility than banks, and they don’t have to treat an applicant’s history as nothing more than a credit score number. For example, if you have poor personal credit due to a single devastating event that does not reflect on your ability to manage your personal funds, an independent financing partner shouldn’t treat this circumstance the same as if you have a long and consistent history of making late payments or defaulting on debts.

The Bottom Line

If you are ready to apply for a business loan, give us a call and we can walk you through the process. Even if your credit score is not ideal for the funding, rates or payment schedule you would like to have access to, we can work with you and our network of professionals to provide you options that will help raise your credit score or remove inquiries on your credit report. 

Unsecured Finances has over 10 years in the consulting business! We specialized in educating and assisting clients on acquiring Unsecured Business Loans and Start-Up Business Specialty Loans including; Unsecured No Documentation (No-Doc Stated Income) Loans, Unsecured Business Loans, and Unsecured Start-Up Business Loans and Lines of Credit from $10,000 to $500,000 without Assets.

Apply on our website to find out if you qualify, or call today for a free consultation: 1-888-294-2584

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