The credit score company Experian has found a correlation existing
between the personal credit scores of small business owners and the credit worthiness
of the owners’ business.
Evaluating the credit worthiness of a small company can be difficult. Because perhaps the business has only been in
existence for a short time, and for other reasons, little, or no, data is available
to judge the business's credit worthiness.
However, the owner may, often does, have a long personal credit history. Based on Experian’s findings, an owner’s personal
credit score correlates well with the owner’s payments of his/her business bills. This gives vendors (other small companies) a
good opportunity for being able to judge a small business credit risk, when no other
data exists. Ask the owner of the small business
you are selling to for a copy of his/her personal credit score and use this
data to evaluate the risk of selling to the person’s company.
Experian’s correlation conclusions were based on a study of
thousands of its records dealing with small business owners. You can read more about this study by clicking
here (Section III) (PDF file).
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