10.25.2010 / Manage Your Business Without Jeopardizing Your Personal Credit
Getting a business loan can be helpful for small businesses looking to grow, restructure or even get off the ground! Below are a few tips to think about before getting a loan:
"Owning a successful business, after all, is the American Dream for many."
- Most lenders will look at a small business owner’s personal credit. Because lender’s don’t report business loans to credit bureaus, a lender will often look at your credit to get a feel for whether or not you can keep up with payments. Before you get your first loan, be sure that you know how your personal finance’s shake up.
- Personal credit isn’t the only option. Many small business owners will turn to personal credit options such as credit cards, a second mortgage or other personal options when financing their small business. Before you take those options, be sure to check your bank for small business loans – they may be easier to get than you think.
- Don’t borrow until you are ready. Can you wait another six months or a year before borrowing? The “right time” to borrow money can differ for each business, but make sure you are there before you pull the trigger on a loan.
- Have a plan for what to do with the money. Your lender will ask you what you plan on using the loan for. Ideally, your plan will involve growth, direct revenue streams or equipment. Making operating expenses – such as payroll or paying bills – is not an adequate reason to borrow.
- Figure out several sources of paying the loan back. Ideally, your first area of repayment will be your revenue from your business. The second can be a personal guarantee, personal savings, etc.
Have you gotten a business loan? If so, share with us what you did with it and how it helped your business grow!
