How to Avoid Using Personal Credit to Get Business Loans

You are about to start a new business or you have been operating a small business for a short period of time. You need to have money to be able to launch or grow the business and you may be interested in applying for a business loan. However, you don’t want to use your personal credit to get that loan. This may be because you know that your personal credit isn’t as good as it should be or it may just be because you want to keep your personal finances and business finances separate. Whatever the reason, the question becomes: how can you avoid using personal credit to get business loans?

The first thing that you should know is that there is such a thing as a business credit score. You should be working from day one to make sure that you establish and improve this score. There are four companies that track this particular type of score. Two of these (Equifax and Experian) are the same companies that track your personal credit score. The other two (Business Credit USA and Dun and Bradstreet) are commercial credit reporting agencies only. You should make sure that you get a copy of your business credit report from all four of these agencies to see what kind of record you have. You should also request that any business that has loaned your business money in the past file a statement with these companies to improve your score. This will help you to rely on business credit to get business loans instead of having to use your own personal credit.

Okay, that’s great. But what if you don’t have any business credit established yet or if your existing business credit isn’t very good. What can you do to get a business loan that doesn’t require using your personal credit? You have two options. The first is to consider the possibility of business credit cards. The second is to get a loan from an investor. In most cases, only the second option is truly going to allow you to leave your personal credit out of the equation.

When you get a business credit card, you do so using the information about the business. However, you may be asked to supply personal credit information in order to apply for the credit card. If the reason that you don’t want to use personal credit to get a business loan is because you don’t have great credit, you might consider getting a co-signer on your business credit card.

The alternative option here is to get an investor or private lender to lend you the money for your business. Make sure that this is all done legally in order to keep your business protected and also in order to make sure that the loan goes on your business credit report so that you can build up that credit and improve your chances of getting a business loan in the future without involving your personal credit. It is certainly possible to get people to lend you money for your business without doing a credit check on you personally; that’s often what start-ups are all about.

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This entry was posted on Thursday, July 31st, 2008 at 7:22 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.