The business world is highly competitive, and business owners can sometimes feel the fragility of their businesses in this environment. Finances and reputation are two important things that business owners should protect. One business mistakes and it can affect the growth and prosperity of your business.
With this in mind, one is led to think about how well your personal credit score is. Your business can be affected by the state of your personal credit score. Below are some of the ways that credit score can impact your business.
Your business can be affected by your credit score in a number of ways. Business loans can be affected by your credit score.
Personal credit scores are checked by banks and lender before they approve of a business loan applied for. Even if your business is doing great, a low credit score can indicate risk and financial burden to the individual which could impact his business operations. Many loans applications are not approved by financial institutions if there is an individual associated with the company that has a low personal credit score.
There are lending institutions, however, that don’t check on personal credit scores. As long as the business is operating with sustained and consistent cash flow, these lending institutions will approve loan applications. What helps them determine whether to provide a loan or not is the business’ history of revenue.
Personal credit score will not affect the granting of business finances by anonymous donors or venture capitalists. As long as you have a functional business plan or if you are already doing a steady amount of business, many individuals or investors will grant the loan the you need.
There are people who are not aware of their credit scores. Through free and premium services designed to keep you updated on your credit score, you can actually know your standing.
Credit scores used by businesses and individuals are calculated by three major credit bureaus. Three three major credit bureaus are Experian, TransUnion and Equifax. Their calculations are quite different to each other and they even sometimes show radically different results. Lenders, on their own part, evaluate all three credit ratings before they give approval to your loan.
It is still possible to improve on your credit score if you find it rather low.
Your business and success can greatly be affected by your personal credit score. If you want to make sure that you have access to credit and loans when you need them, make sure to keep your personal finance intact. It takes time, effort, and money to rebuild your credit score but it is well worth it f you want to be around for long.