Getting Personal
You want a business loan, but your lender wants to know if you are good for it.
Q:
Recently, I was declined for a business loan due to some negative
personal credit issues, though my business bills have always been
paid on time. What does my personal credit have to do with the
bank's decision?
A:
Quite a bit, especially if it's a new relationship. When you
apply for a loan, one of the first things most lenders do is pull a
copy of your credit report, which shows how you've paid your
personal bills. If you've paid your car loans, credit cards and
mortgage on a timely basis, the lender may conclude that you'll
pay your business bills on time, too. Whether you're
incorporated or not, if there's negative information, they may
give you a painful answer.
Banks are usually required to tell you the reason they declined
your application, and if their reason includes information in a
personal credit report, you have a right to review that
information.
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You should obtain a copy of your report and review it carefully.
It may contain information about someone else or credit issues that
have been cleared up but not reported to the credit-reporting
agency. Do your best to resolve those issues. Then include an
updated report in your next loan request. Be sure to include a
written explanation of any past problems, and be honest about your
credit in your initial interview with a new lender. It could mean
the difference between a quick no or advancement to the next level
of review.
Doug Hood is co-founder of Rainmaker Capital Corp., a capital
acquisition consulting company in Cartersville, Georgia. Co-founder
Marilea S. Hood contributed to this article. Send questions or
anecdotes via e-mail to doughood@rainmakercapital.com
or call (770) 382-8773.