Banks look at personal credit in granting business loans

Small-business owners have some hurdles to scale in seeking a loan.

As a rule, banks will look for at least two or three years of financial results showing good cash flow, if not outright profits. They also will want to know how the money would be used, and they might inquire about the strength of customers and other factors. They might keep close tabs on an owner's personal credit.

Tucson resident Bill Alter found out the hard way.

The commercial-real-estate broker said he believes Wells Fargo canceled his line of credit when it reviewed his credit reports and found some problems, including a disputed utility bill from Arizona Public Service on a home he once owned in Phoenix and a judgment for not paying child support in New Jersey.

Alter said both citations were erroneous.

"I've never been to New Jersey," he said.

Jim McDonald, an APS spokesman, said the company tries to be fair. "If there is an issue, we want to work it out," he said.

In a statement, Marc Bernstein, head of Wells Fargo's small-business segment, said the bank takes many factors into consideration when deciding whether to extend credit. These include the debts, credit histories and cash flows for a business and its owners, plus prospects for the industry and local economic conditions.

"Credit-bureau scores are just one factor of many considered and a small component of any decision," Bernstein wrote.

Neither Wells Fargo nor APS addressed Alter's complaint specifically, but the episode shows why business owners should monitor their personal credit records, too.

by Russ Wiles The Arizona Republic Jan. 1, 2011 12:00 AM




Banks look at personal credit in granting business loans