Husband and I will be starting our new business next year. Finished a complete copy of my business proposal/plan early last month. Just waiting on some money that I supposed to be receiving through school before I can register the business name and get an EIN. Question: Even when this is completed, will the loan officer look into my personal credit history or will they see that I have an EIN for my business (which will be a LLC) and look more into the business credit aspect? I read the forums and I gotten a few answers, but I don't want to go in the wrong path and then be screwed. Any help will be great!
Thanks Have a Cool Day!
The lender basically will believe, "If you won't sign up for your company's risk, why should we."
You will be able to establish certain entry level business credit without PG. But larger, meaningful credit, is no different than personal credit, meanin if your company is new and without established credit history and income, then it is not credit worthy. Thus, you will have to offer PG initially for meaningful credit, at least until you get established, have reported history and documented revenues.
The rule of thumb for business is just like personal. If you don't have established business credit and income, then the business must have a "co-signer" aka Personal Guarantee.
As long as the PG credit is true business credit, which will be reported to DNB and/or Experian/Equifax, then this is a good starting place. Once you establish income, history, use of the PG credit with timely payments and use, you will eventually be able to get Bus Credit without PG.
But it comes down to risk. Most new businesses will fail (statistically) which means they are high risk and most lenders will not give unsecured or even secured credit to a new business unless there is PG and collateral where applicable.