Your personal financial history and your corporate application

personal financial historyDepending on the size of your business, and factors like organization type (ie proprietorship, corporation, LLC), you may very likely be required to provide personal financial history along with your corporate application.

Surprised?

A study published by Pepperdine University on the financial health of small businesses drew direct links to the availability of business credit and the credit worthiness of the business owner, underscoring what lenders have known (and used) for decades: a person who pays their bills on time is more likely to run a business that pays its bills on time.  

If you’re applying for financing, you should be prepared with the following items:

  1. Your personal credit score
  2. Your spouse’s credit score
  3. Your earnings and credit history
  4. Your spouse’s earnings and credit history
  5. A statement of your net worth
  6. A statement attesting to whether you’ve ever, and/or recently, declared bankruptcy

Net: your personal credit score matters – even in business.

If you’re not sure where you stand, here’s 4 things you can do today to get a clearer picture of, and improve your personal financial story:

  1. Request a copy of your credit score from either Transunion or Equifax directly (avoid the multitude of ‘free’ offerings out there).
  2. Create a personal net worth statement, and include it with your application.
  3. Sit with a financial advisor (ideally a pay-for-service advisor) to help you identify gaps, and build a plan to improve your situation.
  4. Work through the Total Debt Service Ratio worksheet (below) – better to do this before someone else does.