How Important Is Your Personal Credit Rating In Business?
Your personal credit rating is something that affects a variety of areas in your life, such as your ability to obtain a mortgage or loan, whether or not you get an apartment you are looking at, a car lease, applying for a credit card, and more. These are also personal finance issues, so it makes sense that your credit rating would play into it. But what about when you own your own business, or you are looking to start up your own business? Does your personal credit rating play into things, and if so, how big of a deal is it?
Here we will take a look at just how your personal credit rating affects your business, so let’s jump right in.
How Do You Plan to Come Up with the Funds?
The first way in which your personal credit rating can affect your business has to do with funding. For most entrepreneurs, starting a business is something that they don’t tend to have the funds on their own to do. What this means is that they need to look for funds elsewhere, which can involve a small business loan.
If you plan to go the route of a small business loan then the very first thing they are going to look at will be your personal finances. The lender will want to know that you are a safe investment and that you will be able to pay back the funds in full, plus the interest. If you have a low credit rating, it can severely impact your ability to get a small business loan. Even if you are able to get approval, you may be placed in the high-risk category, which means your interest rate will be much higher.
What If You Need Office Space?
Unless you plan on opening a small one-person operation out of your own home then you will likely need to rent office space of some sort. With that comes an approval process wherein the landlord will look at your personal credit rating. From the landlord’s standpoint they want to know you will be making your rent payments, so your credit history will help to paint a more complete picture.
Investors Want to Know It Is a Safe Investment
If you plan on having investors, they too will want to know they are making a safe investment. They are essentially investing not just in your business but also in you, so that means your own personal financial portfolio can play into it.
Take Some Time to Get Your Credit Rating in Order
What this all boils down to is the fact your personal credit rating does play a large role in your ability to start and operate your own business. With that said it makes sense to take the extra time and settle any debt and work on improving your credit rating before opening your own business. Things such as a consumer proposal may help. You can learn more about this process by following the link.
Taking all the steps necessary to improve your personal credit rating can help your business get off on the right foot and set it on a path to success.