Guide

You have a business partner. Whose credit gets pulled, and does a partner with bad credit sink the application?

Most funders pull credit on every owner above a threshold, commonly 20 to 25 percent, and require the majority owner or all of them to sign the personal guarantee. A partner with weak credit rarely sinks a revenue-based application on their own, because deposits carry the decision; a partner who refuses to sign can, because most funders will not fund without the guarantee. Decide who owns what and who will sign before you apply, not during.

Who gets looked at

The application asks for every owner and their percentage. Funders typically run credit on anyone at or above 20 to 25 percent — the same threshold the SBA uses for its guarantee rules — and on anyone who will sign the guarantee regardless of percentage. A 10 percent silent partner is usually not pulled. A 51 percent owner always is.

Revenue-based funders weight the scores lightly against the deposits, so one partner at 540 and another at 720 is a normal file. Banks and lines of credit weight them more, and a weak partner's score can move the answer there.

The guarantee is the real question

Nearly every small-business product carries a personal guarantee, and the funder decides whose. Most want the majority owner; many want everyone over the threshold; some accept one guarantor if that person owns enough. A partner who will not sign is the most common reason a partnership's application stalls, and it is a conversation to have between partners before the funder asks.

What the guarantee means: the signer is personally liable if the business does not repay. A partner with strong personal assets and a partner with none are taking different risks by signing the same line, and the operating agreement should say how that is shared.

Structures that come up

A spouse on the paperwork at 50 percent who does not work in the business: pulled and asked to sign, at most funders. An investor at 30 percent who is passive: pulled, and often asked to sign, which they may refuse; some funders will proceed with the operating partner alone. A partner mid-buyout: the funder wants the current ownership as filed, and an application during a buyout is usually better made after it closes. A recently added partner with a bankruptcy or a judgment: read as the business's, because it is now.

Sources

Related questions.

Can we apply in only one partner's name?
The business applies, and the ownership is what it is on the formation documents. Leaving a partner off the application is a misstatement, and it is discovered when the funder pulls the state filing.
Does a partner's credit get hit by the application?
Most revenue-based funders use a soft pull at application, which does not affect the score, and some hard pull at funding. Ask which before the application is submitted; it is a reasonable question.
One partner has a great score and the other has a tax lien. What happens?
The lien is read as the business's problem because the partner is an owner. It does not disqualify automatically — see the tax lien guide — but it will be asked about and priced.

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