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Is Business Credit Based on Personal Credit?
When building business credit, it does not have to be based off of anyone’s personal credit. The business can use the business name and EIN number to build its own credit. To do this the business has to make sure that the foundation of the business is solid.
When applying for credit the business needs to make sure the business uses the business name and EIN number and try to avoid adding the owner of the business or others that may have an interest in the business, name and social security number to the application. If the name and social security number is added to the application this means that the individual(s) will be the guarantor for the credit that is extended to the business, which means the individual that signed as the guarantor will be liable for the business debt. If the business does not pay the debt then the guarantor is responsible for paying the debt.
This could affect the individual’s personal credit especially if the debt is not paid on time. So, by not using an individual’s name and social security number to the application keeps the business credit and the personal credit separate.
With business credit the more credit the business uses and then pays the funds back,, the more credit the business will get approved for from new lenders. The business will then even be given increases from those existing creditors. This is the beauty of building business credit. This does not happen with personal credit.
Just know there are credit reporting agencies that deal strictly with businesses.
Side note- the credit reporting agencies do not and can not report any tradelines on the business credit report unless the lender provides the information for the agencies to report the tradelines to the business credit report.
Join my group here. It is filled with resources and support for entrepreneurs to build their business credit! See what it’s about, here’s the link:
https://www.facebook.com/groups/businesscreditmasterycircle
I will see you on the inside!
About the Author
Kimberly Lewis is currently the CEO of EPC Solutions LLC. She specializes in helping business owners establish excellent business credit scores and then leveraging those scores to access credit and cash for their businesses. For more information on business credit scores, business credit and business loans visit https://epc-solutions.net.