When you apply for business financing there is actually three types of credit that are reviewed for your approval. No matter what you are told, personal credit ALWAYS matters… unless it isn’t being
looked at. For example, when you are applying for business credit you can use your EIN to get approved and leave your SSN off the application. When you do this, your personal credit isn’t even looked at, nor is it used for the lending decision. This is about the only exception in the business funding space.
All other funding types including advances look at and care about your personal credit. YES, you can get approved for cash flow financing and merchant advances with bad credit, but your repayment terms won’t be nearly as favorable then if you had good personal credit.
SBA loans, conventional loans, most other long term loans, and credit lines do require good personal credit for approval in most cases. Collateral and asset type based financing doesn’t care about personal credit as much. This is if financing only looks at collateral for approval, not financing where collateral is required for approval.
There is no FCRA in the business world, so lenders will never disclose to you that they actually pull your business credit when you apply for business financing, except they DO pull your business credit!
Just think, you are applying for money for your business, and your business has its own credit profile and score. So, of course they will want to see how the business pays its bills on top of how you do as the owner. Not having established business credit makes you look like a rookie, a startup, a “non-established” business. This will lead to denial so insure you have at least 5-10 reported accounts, and that you are paying them as you have agreed to.
You actually have three types of credit: Personal Credit, Business Credit and BankCredit. All three should be good to give you the best chance of approval. Your bank rating is mostly based on the amount of money you keep in your bank account over the last 90 days. High 5, account balance of $70,000-99,999, Mid 5, account balance of $40,000-69,999, Low 5, balance of $10,000-39,000, High 4, 7,000-9,999, Mid 4, 4,000-6,999 and Low 4, 1,000-3,999.
Call today to learn more about getting financing for your business.