Will an SBA Loan impact my personal credit report?

September 22, 2021

by a searcher from Cornell University in Sunnyvale, CA, USA

I’m looking for an experienced professional who can provide guidance on whether an SBA loan issued to an LLC I own will impact my personal credit report and debt-to-income ratio. I want to avoid having an SBA loan that ultimately prevents my family from being able to settle into a home in 1-2 years because it shows up on my personal credit report.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Most lenders do not report SBA loans to your personal credit report. They are required to be reported to the commercial credit agencies for the business entities themselves, but that reporting has no impact on your personal credit score. Because of that an SBA loan should not impact your score other than if a bunch or lenders pull your credit when you apply at the same time, in which case you could have a short term decline in your score. However, since you will have to sign a personal guarantee on an SBA loan, it can present as a contingent liability when you go to get a home mortgage loan. Example: if you own the business that you work for and you report business income on your personal tax return, it is likely a mortgage lender is going to ask for corporate tax returns. When they see that business has debt they are going to likely request a copy of the loan statement. Although that loan will not be directly factored into your personal debt to income ratio, it will be indirectly factored in when they look at what business cash flow you have. Hopefully this makes sense. Please let me know if I can provide any more details on this.

Reply by a searcher
from Stevens Institute of Technology in New Jersey, USA

Sorry to update a little late, but as many have said above, think of this as hard inquiry when you go to sign up for a new mobile phone signup :) they will check your credit score and it will affect your credit down a few points but just temporarily. The credit score will be back up (assuming you are following the typical routines). Now if you are planning to buy a home in 1-2 years, you will report what are your obligations which will be for your personal loans such as car, or any other mortgage, The SBA loan obligation should be associated with the business, and it is not necessarily your personal obligation (although you may personally liable as a guarantor) so as long as your business has not defaulted, you should not worry. Disclaimer: I have not applied for any additional loan after the SBA loan guarantee, so I can attest to the later scenario. Feel free to reach out to me directly if you need any additional info.

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