As a growing business owner, your business and personal lives are closely connected – plus your financial life is no exception. Your personal finances, which include debt, credit and cash management skills all come into play as you are looking for funding for your small business. As said by the Small Business Administration (SBA), access to capital is the only obstruction business owners experience when developing their small business. A good way to get access to capital at low rates, knowing and understanding your personal credit score is very important.
Personal Credit vs. Business Credit
As a growing business, lenders will depend on your personal credit rating as a way to assess the risk of investing in your business project due to the fact that your business doesn’t have a strong credit score. Even as the business develops, your personal credit score is frequently evaluated along with your business credit. Therefore it is essential to know what every rating measure and how you can build them to access the working capital your business needs to develop. Your personal credit is a comprehensive record of your history of borrowing cash and repayment. Your business credit is a same record; however determines the creditworthiness of your business.
Impact Of Personal Finances
Personal debt management plays an important role in your personal credit rating. In case you are overloaded with debt or not able to make payments on time, your credit score suffers. This will limit your access to business credit and cause higher interest on the credit you are offered. Furthermore, many lenders including the SBA assess your personal tax returns and bank account history before making credit decisions.
Improve Your Personal Finances To Help Your Business Access Capital
The first thing in improving your personal finances is to understand where they presently are. Get your personal credit report from each credit reporting bureau and make sure that each one facts in your report is accurate and dispute any records that isn’t always, keep in mind that any erroneous information stays on your credit report for seven years, even when you have paid it off. In case your credit score is low, make a plan to improve it by paying off your credit cards and making bills on time for all secured loans.
When you have a huge personal debt, it is the time to deal with it. Excessive personal debts will affect your personal credit rating and put off lenders from approving your loan applications. Furthermore, the hassle associated with the high debt will have bad effects on your health and productivity, similarly affecting your business.
In the end, create a system of monitoring, spending and budgeting that works for you. This simple thing will have remarkable positive effects on your personal finances and can direct your approach to business loan repayment.