A beneficial owner is someone who owns 25% or more of the business or has significant control (e.g., CEO, CFO). In May 2018, a federal regulation was enacted that requires financial institutions to collect and verify information about beneficial owners. Certain entities, such as sole proprietorships and nonprofits, are exempt from this requirement.
Individuals with majority ownership (51%) or operational control of the business must provide personal guarantees. Additionally, anyone owning 20% or more of the business must also act as a guarantor.
Applying for a business loan typically does not affect your personal credit, as it involves only a soft credit inquiry. Business loans usually don’t appear on your personal credit unless your Social Security Number is used as the business’s tax ID. However, if you’re a guarantor and the business defaults, your personal credit may be impacted.
