When you’re trying to get a business loan, you may be relying on your personal credit score to get financing. If you’re wondering if you need to be debt-free to get a business loan, read on for information about how your personal credit can affect business financing.
Personal Debts Don’t Have to Hold You Back
The average American carries a heavy debt load, between credit cards, student loans and mortgages. It’s rare for a person to be debt-free before starting a business. Many people do have debt when applying for business loans. The key isn’t about having no debt, but about monitoring your budget and making sure that your budget can handle debt.
Business Loans Can Complicate Your Personal Credit
A business can financially change your life, but it also adds legal issues to your estate. When you’re starting out, you may only qualify for business loans based on your personal credit. This can comingle your personal and business finances, creating future problems if your business fails. Personal loans and business debt can impact how you attract business partners or potential investors. When your personal finances are so intertwined with your business, it’s a liability.
Balance Personal Debt When Building a Business
If you’re stressed over personal debt, it can impact your ability to be successful in business. When you complicate matters with a business loan, you may be more worried about paying back your loans than actually giving your business a strong foundation. You shouldn’t let debt keep you from following your dreams, but you also need to be smart in handling personal and business debt. Know your limits. Watch your balances. Have a solid plan to pay off debt, both business and personal. Try to get your personal debt out of your business as quickly as possible.
Contact Emerald Valley Financial Services for information on business loans and financing options for your business.