How do I establish a business using my business credit rating?

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How do I establish a business using my business credit rating?

I’d like to partner with potential business
owners, helping them obtain business loans
using my business rating. However, in a
contractual way that’s safe for me, but if
they fail to pay back the loan, it’s
profitable for me.

Anthony

Asked on October 7, 2016 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

What you're proposing is illegal, *unless* the way you see it working is that *your* business will not just get the loan but will then use the money for the thing the loan was taken out for--i.e., your business will actually *be* the business, and other people will just be investors. Or unless you become a lender yourself: e.g. in some fashion you borrow money by *truthfully* disclosing that you intend to re-loan or re-invest it, then do so.
Otherwise, if you intend to take the money and give it to another business, if you did not disclose that purpose on your loan application, you have committed fraud: lied about the purpose of the loan. You could face criminal prosecution for that, as well as being sued for the return of the money (and probably legal fees incurred by the lender, too).
Or, of course, you could enter into a partnership with the other business and disclose that fact in applying for the loan--but then banks will look to your partner's credit worthiness as well, and also the quality and safety (in an investment sense) of our proposed business venture.
There is no legal way to "lend" or "use" your credit rating to get loans for others legally without disclosing what you are doing; otherwise you are lying to the lending institution.


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