Business Credit vs. Business Loans: What's The Difference?
How does it work?
When considering how to finance your business, you might assume that business credit and loans are completely separate. However, that's not entirely the case.
For instance, business owners with poor personal credit can still leverage strong business credit to secure loans. Business credit is one of the five key principles of Corporate Credibility. When evaluating your loan application, lenders don’t just look at your personal credit score—they also consider additional factors that help them answer the most important question: Will you repay the loan?
It's possible to have poor personal credit and still maintain excellent business credit. If your business credit is strong enough, lenders are likely to prioritize it when making their decision.
How Business Credit Affects Loan Approvals
When you apply for a loan, lending institutions will review your business credit as part of their evaluation process. They’ll look for several key details:
- Do you consistently pay your bills on time?
- Are there any negative items on your credit report, such as liens or lawsuits?
- How long has your business been operating?
- Is your business seen as credible?
- Does the information on your credit report match what you provided in your loan application?
If the answers align favorably, you're more likely to be approved for a loan. However, the approval amount might differ from the amount you originally requested.