If you’re building a startup and need financing, you might be wondering whether your personal credit impacts your business credit. It can. However, your personal financial status isn’t necessarily a permanent roadblock to starting your dream company. Here’s some information on getting a business loan even if you have a low personal credit score.

The Chances of Personal Credit Impacting Business Credit

If you’re a sole proprietor, personal credit is more likely to affect your ability to secure a loan than it would otherwise. Expect your personal credit to be checked if the loan application you fill out asks for your Social Security number. It’s less probable that it will play a role when only your Employer Identification Number is requested. 

The Impact of Credit Scores

When requesting a bank loan, your credit scores play a determining role. Higher scores mean you have a better chance of being approved and securing a favorable interest rate. Poor scores suggest the opposite. Even if your scores are bad, some lenders will still be willing to work with you. Entrepreneurs with scores of 720 and higher are in good shape. If yours are 660 or lower, you’ll probably need to select an alternative lender.

The Choice of Lenders

Loans available to those with poor credit include short-term loans, private lending, microloans, bridge loans, and merchant cash advances. Beware that many alternative financial lenders charge particularly high rates. If your score is on the more desirable end, go with a traditional financial institution that is able to offer lower interest. In either case, make sure you are able to pay down your loan and do so as quickly as possible.

The Challenge of Building Credit

Improving credit ratings puts you in a better position to secure a business loan. Start by registering your business with one of the major credit reporting agencies. Next, open a business bank account and limit it to activity that’s related to your company. Periodically check your score and dispute errors. When applying for a loan, do it in the company’s name. Pay bills on time and make payments using company checks or credit cards. These actions should eventually give you a more favorable standing.

The quality of one’s business credit can be negatively impacted by poor personal credit. Even if you’ve made serious financial mistakes, don’t let that stop you from pursuing funding for the commercial enterprise of your fantasies.