How does your personal credit score affect an unsecured business loan?

Whether you’re starting a business, purchasing new equipment or covering gaps in cash flow, you may need a capital injection through an unsecured business loan. But when you aren’t putting up security, a lender will look at your personal credit score as well as your business financials – and a poor credit score could negatively impact your ability to get a loan.

Here’s what you need to know:

What are lenders looking at?

If you’re applying for an unsecured business loan, a lender will look at the credit scores of the directors of the company and, if available, the commercial creditworthiness of the business itself. A poor history in either of these cases might stop you from getting the loan you want.

However, a poor personal credit score doesn’t always stop you from getting an unsecured business loan. It may simply adjust the conditions of the loan, particularly in terms of interest rates.

Why do lenders care about my personal credit score when I’m applying for an unsecured business loan?

When someone applies for an unsecured business loan, they are often expected to sign a personal guarantee. This guarantee means that should the business default on their payments, the guarantor (the person who signed the guarantee) will need to pay it instead.

This means that the personal finances and the commercial finances are intertwined. If the commercial side runs into trouble, the lender needs to know that the guarantor can make the payments, so they check the borrowing and repayment behaviour of both. Hence the personal credit check.

If personal credit scores weren’t checked, then the lender wouldn’t be able to figure out the risks of lending and would probably be a lot more conservative about who and what they financed.

This is why it’s standard for any lender to consider both the creditworthiness of the individual applicant and their business – it’s rare not to check both.

I have bad credit, can I get an unsecured business loan?

While some lenders, particularly banks, have strict rules around personal credit standards, other lenders will be more flexible.

Rather than rejecting the application out right, these lenders will instead see poor personal credit as a reason to investigate further as to the reasons for the bad credit. It’s less about the score itself and more about the reasons for that score.

A bad personal credit score may reduce the amount you can borrow or increase the interest rate being charged – or make no difference at all. It’s not an instant kill-switch on the loan approval process.

How can I improve my personal credit score?

If your personal credit score does impact your business loan application negatively, there are some ways to fix the damage. This includes but isn’t limited to:

  • Repaying defaults
  • Building up a history of regular repayments
  • Fixing errors on your credit file
  • Avoiding taking out more debt
  • Avoiding making lots of loan applications.

Find out more about fixing your personal credit score.


  • Your personal credit score will impact your ability to get an unsecured loan
  • But a poor personal credit score will not stop you from getting a loan by itself
  • Lenders check your personal credit score to get a better picture of the lending risks
  • Lenders have different standards for personal credit and business lending criteria, so shop around if you’re rejected the first time. You do have options.
  • If your personal credit score is impacting your loan applications, there are ways to fix it.


For more information on your business loan options, get in touch with us on 0508 438 227 or make an online enquiry today.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact Avanti Finance or your financial adviser. Neither Avanti Finance nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this publication. References to third-party websites are provided for your convenience only. Avanti Finance accepts no responsibility for the availability or content of such websites.

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