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How to use your personal credit to get a business loan

young woman helping senior man with payment on internet using laptop
Photo by Andrea Piacquadio on

Using your personal credit to secure a business loan is a common practice, especially for small business owners and startups. Here are steps to help you use your personal credit to improve your chances of getting a business loan:

  1. Check Your Personal Credit Score:
    • Start by obtaining your personal credit report and credit score from one or more of the major credit bureaus (Equifax, Experian, and TransUnion). You can often get one free credit report per year from each bureau through
    • Review your credit report for inaccuracies and dispute any errors you find.
  2. Improve Your Personal Credit Score:
    • If your credit score is lower than desired, take steps to improve it. Some strategies include:
      • Paying bills on time: Ensure you pay all your bills, including credit cards and loans, on time.
      • Reducing credit card balances: Aim to lower your credit card balances to below 30% of your credit limit.
      • Avoiding new credit inquiries: Minimize the number of new credit applications you submit.
  3. Separate Personal and Business Finances:
    • Establish a clear separation between your personal and business finances by creating a business entity (e.g., LLC, Corporation). This can help protect your personal assets in case of business issues.
  4. Build a Strong Business Credit Profile:
    • Open a business bank account and maintain a separate set of financial records for your business.
    • Apply for a business credit card in your company’s name and use it responsibly to build your business credit history.
  5. Apply for a Business Loan:
    • Research and identify the type of business loan that best suits your needs (e.g., term loan, line of credit, SBA loan).
    • Prepare a comprehensive business plan that outlines your business’s objectives, financial projections, and how you intend to use the loan funds.
    • Gather all required documentation, including personal financial statements, business financial statements, tax returns, and any additional documents the lender may request.
  6. Choose the Right Lender:
    • Select a lender that is likely to approve your loan based on your credit score and business profile. Different lenders have different criteria, so research your options thoroughly.
    • Consider online lenders, traditional banks, credit unions, or Small Business Administration (SBA) lenders, depending on your specific needs and qualifications.
  7. Be Prepared for Collateral and Personal Guarantees:
    • Depending on the lender and the type of loan, you may be required to provide collateral (e.g., business assets, personal assets) or a personal guarantee.
    • Understand the risks associated with providing personal guarantees, as it means you are personally responsible for repaying the loan if your business cannot.
  8. Apply for the Loan:
    • Complete the loan application with care and attention to detail.
    • Be prepared for the lender to review both your personal and business credit histories as part of the application process.
  9. Negotiate Terms:
    • If possible, negotiate the loan terms, including interest rates, repayment schedules, and any fees.
    • Be sure you understand all terms and conditions before accepting the loan offer.
  10. Maintain Good Financial Practices:
    • After obtaining the loan, continue to manage your personal and business finances responsibly. This includes making timely payments on both personal and business debts.

Remember that the specifics of obtaining a business loan using your personal credit can vary depending on your location, the type of business, and the lender’s requirements. It’s essential to do thorough research, compare offers, and seek professional advice if necessary to make the best financial decisions for your business.