Do Personal Guarantees Affect Credit Scores?
Whether you’re a solopreneur launching a start-up or a small-business owner seeking to grow your company, you might need extra funding. And if you’re looking for business loan, you might need a personal guarantee.
What Does a Personal Guarantee Mean?
A personal guarantee means you personally promise that a debt will be paid back. If you sign a personal guarantee on a business loan, you are responsible for paying back the money if the business is unable to do so.
Why Would a Lender Require a Personal Guarantee?
Personal guarantees are all about reducing risk for the lender. If you sign one, it has two potential entities to chase to collect the loan.
How Does a Personal Guarantee Affect Your Credit Score?
Whether or not a personal guarantee affects your credit score depends on the situation. First, business loans may or may not be reported on your credit history.
This is a personal decision that depends on a variety of factors, including your confidence in the business. But here are a few questions to ask yourself before you take this action, which can have long-lasting consequences on your own personal finances.
Should You Sign a Personal Guarantee for a Business Loan?
Do you really need to guarantee the loan?
Your business doesn’t need perfect credit to get a loan, and there are many financing options available. Make sure you explore all your resources and understand what they’ll cost you and your business before you decide on one.
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