Does borrowing a business loan affect my credit score?

Business Loan Online

Running a business is not an easy task as it involves many parameters that a business person has to take into consideration while making decisions. Getting a Buddy Loan for the business can sound intimidating as it introduces you to some business terminologies that are important from the point of finances. Availing a loan for your business can have an impact on your credit rating as well. The following points discuss the credit ratings in detail.

Understanding Business Credit Score

BSC or Business credit score is a number that demonstrates whether an organization is decent to get a credit or become a business client. Credit scoring firms check the company’s credit history, which includes obligations and repayment to lenders and suppliers, tax filing issues, and bankruptcies. The score is generated after checking the history as well as years of operation of the company, type of business involved in, repayment issues, if any, and the business plan of the borrower. If all the parameters are right, your business credit score will be good, and it will be easy to get a loan from the financer. 

Personal Credit Score

 A personal credit score is a statistical number that showcases the creditworthiness and the history of credits of the borrower. It involves checking the number accounts in the name of the borrower, total debt on the borrower, and the repayment history. The credit score can range from 300 to 850 and is calculated on the abovesaid details. It shows the repayment ability of the person promptly. 

Depending upon the type of business, your personal and business credit scores affect each other. If you have a sole proprietorship business, then your credit score is your business score. In such a case, if you default on the payments, then it will affect your credit score. 

In a partnership business, the personal credit score of the partners and the firm are essential. Any default on the firm’s part will reflect on the personal credit scores of the partners. In limited liability partnerships, the partners are liable only partially for the debt. Still, the credit company requires the personal credit score of the partners. In a limited company, there is no debt burden on the shareholders, and the debt is in the name of the organization. Yet, the personal credit history of the directors is involved. It is, therefore, critical for a small business owner to maintain a good personal credit score and business credit score.