Making the Grade

Because an impressive fico score won’t guarantee a loan, you’ll have to balance out the equation.

Question: How can I use my personal credit to get a loan to start a business? I’ve got a credit score of 730, which is pretty good, but I’ve never started a business before. Any advice?

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Answer: Having excellent personal credit puts you a step ahead of other entrepreneurs seeking business loans--even if this is your very first business. The fact that you pay your personal bills on time and don’t take on more debt than you can handle shows banks and other potential lenders that you’re the type of person who knows how to manage your money and can be trusted to pay loans back. But your FICO score alone won’t be enough to persuade a bank to bank-roll your startup, especially if you’re a first-time business owner. That’s why Helen Poon, a principal at Ignition Point LLC, a consulting firm that provides outsourced CFO services to emerging businesses, suggests you approach the bank with a solid financial forecast showing the level of sales and profits you expect your business to achieve as well as a list of personal assets (your house, stocks, bonds, etc.) that you’re prepared to put up as collateral. Because so many startup businesses fail, banks typically require entrepreneurs to personally guarantee the money they borrow. "As long as you can collateralize some of the debt and there is strong potential for positive cash flow," says Poon, "a small business can win the bank over."

Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses. She can be reached by e-mail at rosalind@abcbizhelp.com or through her website, abcbizhelp.com.