Your personal finances come into play as you seek funding for your small business. In order to access capital at low rates, knowing and understanding your personal credit score is imperative.

By Mike Kappas

As a budding entrepreneur, your personal and business lives are intimately linked – and your financial life is no exception. Your personal finances, including debt, credit and money management skills all come into play as you seek funding for your small business. According to the Small Business Association, access to capital is the single largest roadblock business owners face when growing their business. In order to access capital at low rates, knowing and understanding your personal credit score is imperative.

Personal versus Business Credit:

As a fledgling business, lenders will rely on your personal credit score as a way to assess the risk of investing in your entrepreneurial endeavor because your business does not yet have a strong credit rating of its own. Even as the business grows, your personal credit is often reviewed along with your business credit. Consequently, it is important to understand what each score measures and how to build them in order to access the capital your business needs to grow. Your personal credit is a detailed record of your history of borrowing money and paying it back. Your business credit is a similar history but measures the creditworthiness of your business.

Impact of Personal Finances:

The management of your personal debt plays a large role in your personal credit score. If you are overburdened with debt or unable to make payments on time, your score suffers. This can limit your access to business credit and result in higher interest rates on the credit you are offered, cutting into profit margins. In addition, many business lenders (including the SBA) review your personal tax returns and bank account history before making business credit offers.

Improve Your Personal Finances to Help Your Small Business Access Capital:

The first step in improving your personal finances is to know where they currently stand. Pull and review your personal credit report from each bureau for free by visiting www.annualcreditreport.com. Ensure that all information on your report is accurate and dispute any information that is not, keeping in mind that negative information stays on your report for seven years, even if you have paid it off. If your score is low, make a plan to improve it by paying off your credit cards in full every month and making payments on time for all secured loans.

If you have a large amount of personal debt, now is the time to address it. High personal debt loads will impact your personal credit score and discourage small business lenders from approving your loan requests. In addition, the stress associated with high debt can have negative impacts on your health and productivity, further impacting your small business.

Finally, create a system of tracking spending and budgeting that works for you. This basic habit will have tremendous positive effects on your personal finances and can guide your approach to business loan repayment.


Mike Kappas is the President and CEO of Apprisen, a Columbus-based not-for-profit financial services specialist providing financial resources for employers and individuals.