Is my credit history an important factor to consider when opening a new business?
I want to start a new business. I want to know if credit history is an important factor to consider when opening a new business.
It is dependent on the corporate structure of the business.
If you will be a sole proprietor, LLC or S-Corp, it will be important in order to get a corporate credit card, obtain credit from vendors and to get a business loan. For credit cards, your personal credit will be a factor even with C-Corp status. Personal credit could also impact your business insurance policies.
It is not just if you need a loan but you have to prove you are trustworthy. Unlike the legal system, with banking systems world over you are guilty until proven innocent, so you have to prove your trustworthiness before anyone will trust you.
This means you have to provide proof of your ID, proof of residence, proof of trustworthiness (credit history) before anyone will open a bank account for you and even if you want to put money in it they want you to prove where it came from (anti-Money-Laundry laws). So no history, no bank account which means you can get stuck in Catch22 situation.
Hope this helps.
For sure. Your history and credit score determine IF you get a business loan, a low or higher interest rate, etc. It takes a long time to divorce your personal financial life, including guarantees, pledging personal collateral until the business builds its own credit rating. Be sure you retain personal funds to fall back on, if necessary. Do not put every penny in the business. Good Luck.
It's a factor, like a lot of other factors. Are you planning on getting funding or loans then it might have impact. Are you self funding, then probably not. Better to have a good history but it's only going to surface as credit history if you actually exercise a request!
If you need loan , any bank will check your track record how your past loans where paid. So if your Credit history is good you have a better chance of getting quick loan.