Will my personal financial history affect my startup?

For many new sole traders or home-based businesses, it is often necessary to finance a new business venture using personal credit, before a business credit profile can be developed. Obtaining a loan to finance some level of capital investment in an existing business, while still a necessarily complex process, is a far simpler endeavour for the existing small business owner, as they have a tangible business history to reference during the application process.

However for many new business ventures, obtaining funding is difficult, particularly when more traditional lending institutions such as banks are taken into account.

From a lender's perspective, extending credit to new sole traders are difficult as more often than not, they have no business credit history to assess. Lenders will need to see that you can manage your current levels of credit and debt, before granting your business a loan or business credit card.

In most cases, your personal credit history will be taken into account when assessing your eligiblity for credit due to the lack of a business credit history. This usually forms part of any standard credit assessment process and may include elements as personal credit defaults, bankruptcies and the number of credit enquiries, among others. An assessment of current debt levels is also taken into consideration.

This is often the point when many potential business owners wish they had paid more attention to their credit report in the past. A personal credit report can be effectively managed from the moment an individual becomes credit-active, through continual monitoring of what appears on the report, and via good credit management practices.

Continual monitoring of their credit report allows consumers to familiarise themselves with the contents, increasing the likelihood inaccuracies will be spotted. Likewise, knowledge of personal credit history means consumers are approaching lenders equipped with more information, helping to negate any surprise outcomes.

To order a copy of your personal credit report click here>>

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