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

UPDATED: Sep 30, 2022

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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.


Asked on October 7, 2016 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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