Does your personal credit history matter?
If you’re going into business for the first time, you may be wondering how a bank decides to give you a loan.
Entrepreneurs who have started businesses before already have a track record, and banks can use that record to decide if they’re good candidates for financing.
But what if this is your first company? Even without a long business track record, a strong personal credit history and a good business plan can help you qualify for financing.
Your credit history is comprised of information gathered from financial institutions, utilities, retailers, and other lenders about how you’ve handled credit in the past, so it can help prove that you are financially responsible. If you have a mortgage, car loan, credit cards, or student loan, your credit history will show whether you regularly pay your bills on time—key things a lender looks for when deciding whether to extend credit.
Besides your personal credit history, you’ll also need a well thought-out business plan that tells the bank how you intend to use the loan, and projections of cash flow that will allow you to repay the loan. Get started on developing your business idea by working through the Scotia Starting Line for Business, a tool that gives an overview of what’s needed for business startups.
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