A credit score is a reflection of an individual’s or a businesses’ financial health. If you have a poor credit score and start a business, you’ll likely face a lot of problems due to your poor personal credit score, such as troubles if you apply for a business loan as far as rates and size of the loan.

In fact, your loan applications can instantly get rejected for a business loan if you have a bad personal credit score. Read on about the loss that your business can suffer due to your poor credit score:

1. Limited capital for business

If you are an entrepreneur, you probably know the importance of smooth capital flow. An insufficient budget can take a toll on your business. A business has to spend money on a large number of assets like licenses, equipment, office space, utilities, and much more. If you start a small business venture, there will likely be times when you have to use your personal expenses to ensure your business runs smoothly. However, if you have a poor credit score, this can jeopardize your chance to get loans for your business.

2. Rejection of business loans

A business, especially a startup firm, has to spend large upfront costs on a number of things that often can’t be invested in without a loan. Banks or any other private lender will take a look at your personal credit report before sanctioning your loan for business. In the United States, if your score does not lie in between 300 to 850, then you have to face the consequences of the rejection of loan application, or possibly smaller loans with high-interest loans.

3. Additional supply costs

If you are thinking your personal credit score doesn’t play a role in a business loan, you are wrong. In addition to the potential lender, you may have to show your credit reports to the suppliers when buying assets for your business. There may be some suppliers who will be willing to give you supplies with a bad credit score. However, in such cases, you will often have to spend additional costs on purchase. In the case of bad credit, distributors who might provide you with raw materials will likely not be open to you paying in installments.