Bad credit scores can affect our personal finances. If you have a bad credit score, you will have to pay a higher rate of interest on your loans and mortgages. However, do you know that poor personal credit can also affect your business even though business credit and personal credit both have their own separate scores?

If you are a business owner with little or no proven record in business acumen, there is a high possibility that banks will look at your personal credit history while reviewing your loan application. If you do not possess a business credit score, then it is only fair to evaluate you on your personal credit score. If your personal credit score is poor, it is more likely that your loan will get rejected, or you will have to pay a higher interest once it is approved.

A poor personal credit score can lead to the following problems in your business venture.

• Problem with loan approvals
  Personal credit scores in the country mostly range between 300 and 850. If your credit score falls, your business loan application will be rejected outright. Moreover, banks these days are offering far less small business loans as compared to earlier. Therefore, you may have to opt for an alternate lender who will charge you higher interest.

• Problem with inventory
  Your providers also tend to check your personal credit score while assessing you and charging you. When you request for services, the utility provider may check your credit score and ask you to pay a higher deposit if your score is poor. Similarly, distributors may hesitate to do business with you, more so if they are giving you credit in terms of inventory. They may want to safeguard themselves by charging you more than they charge others.

Opt for business credit cards rewards
Here is why small business credit cards with rewards are gaining popularity. They act as financers for businesses where business owners do not qualify for traditional business loans or do not have access to networks where people can help them with finances. Whatever be the nature of your business, small business credit cards rewards can always help. These cards mostly have great reward programs and also offer higher spending limits as compared to consumer cards. A few of them also offer additional benefits such as customized concierge facilities, balance transfer promotions, low annual percentage rate (APR).

Keep in mind that most of these small business credit cards with good rewards come with an annual subscription fee and also require you to have an excellent personal credit score to qualify. Some card issuers are strict and ask for financial statements, seek evidence of business incorporation, among others, before issuing you a card. If you are unable to satisfactorily provide these documents, they reject your card application. Some issuers are relaxed and they give you a card with just a valid social security number and a condition that you can only use the credit card for purely business purposes.

Bad credit has been labeled as “bad” for a relevant reason. It is a fact that a bad personal credit score can make it difficult for your business venture to take off. Right from a high rate of interest on approved loans to the rejection of loan applications to higher charge for inventory and space, a poor credit score can lead to the shelving of your business even before it actually starts. It is in every entrepreneur’s best interest to improve their personal credit score and get it up as high as possible, before starting off their own business.