Business loan requirements of some lenders places personal credit score over business credit score. The need to build a good personal credit score never stops for business owners.
As the need always arises and presents itself. When lenders and banks review your loan application, they usually pay more attention to your personal credit score. This gives them a subjective insight into your personal treatment of funds.
Why is your personal credit score part of your business loan decision?
Lenders are usually are at a high risk in loan agreements especially in cases where there is no collateral. That is why lenders require assurances before giving out loans. Your personal is an integral part of that assurance.
Personal credit score evaluates your creditworthiness as an individual. It is more reliant than business credit score because unlike business credit, personal credit remain with you for life.
Also, personal credit score doesn’t only give an insight into your present creditworthiness. It gives lenders an insight into how credit worthy you have been your whole life. Another reason why it is so important.
How personal credit affects your loan options
It is very good and important that small business owners maintain a relatively good personal credit score. So much so that when they need to support their business’s finance, they would find sources and be eligible with ease. Click here to get how personal loans affect your credit score.
Personal credit score boosts your eligibility for any kind of loans as getting business loans can be very competitive sometimes. The truth is different lenders weigh your credit score and here is how.
· Traditional lenders and banks
With a low credit score getting business loans from banks and traditional lenders becomes difficult. This category of people would typically require a credit score of above 700.
Banks and traditional lenders tend to offer more loan options to entrepreneurs with high credit score. So, the higher your score the greater your chances of getting their approval.
· Small Business Administration (SBA)
The SBA have stricter loan requirements. They are however capable of reducing their acceptable threshold to help small businesses. They reduce it as long as you meet other requirements completely. They usually require a personal credit score of 650 and above. Anything lower that 650 reduces your chances.
· Online small business lenders
For businesses with low credit score, this is the best option to consider. Online small business lenders offer loan options to small businesses with credit score lower than 650. This offer is open to small business owners provided they are willing to prove their ability to repay the loan. Check out small business loan options on www.whitecenterpromise.org/small-business-loan-options-under-the-cares-act/
The disadvantage of this loan is that; unlike traditional lenders, banks and SBA, they usually come with higher rate. But it is also advantageous in the sense that application and approval takes shorter time than the other options.
Small business owners should never stop building their personal credit score. Most lenders always use personal credit score to weigh credit score. Asides business, your personal credit score is a reflection of how prudent you are with funds.