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The short and simple answer to this question is yes your personal credit can affect your ability to qualify for a business loan. The good news is that there are many different variables that affect your ability, as a business owner, to get approved as well as countless alternative lending options. So if you have less than great credit we urge you not to give up before you’ve tried a few alternative possibilities.

Getting the Money You Need

For small business owners the economy plays a large role in the creation of your credit rating. If the economy is less than great small businesses are the first to suffer. Typically this means that owners are more likely to dip into their personal savings or max out personal credit cards to keep their businesses going which will in turn hurt their personal credit ratings.

The fact of the matter is that getting the capital you need to keep your business going is the hardest part of owning a business; add a bad economy and a low credit rating to the equation and the loan process will feel impossible.

Is There a Solution?

Every business owner’s credit situation is different but there are alternative options to choose from that could provide you with the financial solution you’ve been looking for. Bad personal credit will make obtaining the loan you need more difficult but only insofar as you’ll need to do some research and find an alternative lender who takes other factors into consideration when approving business loans.


While this is a relatively new option available to Canadian business owners, revenue based loans could be the solution to your financing problems. This type of loan takes into consideration your regular revenue, the money your business is making and is depositing into your bank account. Your interest rate will be higher than the one you might get from a traditional lender like a bank but the approval rate is also higher. You’ll be lent a percentage based on your regular bank account deposits and then you’ll repay the loan in small daily increments from your business bank account.

Credit Card Sales

This type of funding is typically called a merchant cash advance. It provides a business with cash in exchange for a percentage of its future credit card sales. Basically what happens is you’ll be lent a certain amount of money and then you’ll repay it using money from your credit card sales. If you suffer from poor credit but your business has a significant amount of daily or monthly sales a merchant cash advance is a great alternative loan option. Just remember that not all merchant cash advance lenders are created equal, some have extremely high rates and unfavourable terms. Do some research before you accept any offers.

A Business Partner

While this might not be the best option for all small business owners it is defineitly something you should consider if you’re having a lot of difficulty obtaining the financing you want and need. A business partner with good credit could act as a credit partner for you and your business. They could help you get a new business credit card or line of credit and could co-sign a business loan with you. You’ll need to choose someone who you trust as co-signing a loan with someone you hardly know is never a good idea. But if you have a friend or know someone who is interested in your business then they could be an invaluable asset to you and your business.

Weight Your Options

In regards to a business owner’s personal credit and their ability to get approved for the financing they need, there are a few factors that need to be considered. The most important factor is what type of lender you choose to go with. A more traditional lending institution like a bank will 100% look are your credit and if you have bad credit this can and will affect whether or not you get approved. While an alternative lender can provide you with more options and leniency when it comes to your credit rating. The second most important factor is what kind of financing you want and need. Credit cards, lines of credit, small business loans and merchant cash advances, there are countless options for you and your business. So choose a lender who can provide you with a best solution for your financing needs. And don’t be surprised when it’s an alternative lender who can offer you with the best options, rates and terms.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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