18. Optimize Your Personal Credit

Up to this point, all the steps you have taken involve your business entity. But your personal credit still matters in business loans. Your personal credit can play a crucial role in your ability to get various lines of credit, especially during the initial stages of your business.

Using Personal Credit to Enhance Your Business

The top reason for working to build business credit is so you don’t have to use your personal credit and everything is separated from your personal finances. You are on your way to this phase, but you may have to use personal credit to get started.

Building a quality business credit profile allows you to secure vendor lines of credit, as well as credit cards, fleet cards, leases, and many other business opportunities. However, there is a formula that you need to understand.

When seeking loans for your business, the owner’s personal credit can make a difference. In most cases, 720 or higher is considered a strong personal credit rating. If an owner of over 15% of the business, or a corporate officer, such as a COO or president, has personal credit over 720, many financing opportunities are made available, with potential for lower interest rates and better approval chances.

Banks and business lenders are currently looking at both personal and business credit. If the business has a strong credit foundation with a long history, the lenders will likely look at business credit only. In fact, you can have 10 to 100-time more credit capacity if you use business credit as opposed to personal credit. However, personal credit can still make a difference.