Getting Business Credit with Bad Personal Credit

Most people don't have perfect credit, and if your credit is downright bad, you might be worried that you'll never be able to get credit for your business because of your low credit score. nnThe good news is that bad personal credit doesn't have to keep you from getting an unsecured business line of credit. There are some concrete steps you can take to establish a good reputation in the business side of your credit life. nnFirst, you have to legally separate yourself from your business. That means giving your business a legal structure such as a corporation or limited liability company (LLC) that has a legal life outside of you. nnThis is important because if you're a sole proprietor, in the eyes of the law you are your business. By extension, your personal debts are the same as business debts in the eyes of potential lenders. nnThe right business structure won't completely negate your bad personal credit, because if you're applying for a loan (also known as cash credit) the bank will get your social security number and pull a credit report on you. Most banks won't deal with a business that has an owner with a credit score below 640. nnIf you have a low credit score and know you are going to be needing cash credit for your business in the future, take the time now to work on building both your personal credit rating and your business credit. nnEven with less-than-stellar personal credit you can build some business credit in what's known as trade credit. A good example of trade credit is when the office supply store issues you a credit card. This line of credit can only be used with that business. nnThis kind of credit is fine for some businesses that don't need working capital, but many other businesses are going to need those cash credit loans at some point.nnThe single best thing you can do for your business credit besides setting your business up properly (that means the right business structure, a physical address, a business phone line, etc.) is getting a good handle on your personal credit as you are building up business credit. nnThat way when you go to a bank looking for an unsecured line of business credit, you'll have decent personal credit as well as good business credit, which is a much more favorable situation from the bank's point of view.