Why are personal credit scores relevant when considering a commercial loan to a business?

Personal credit scores are relevant to commercial loans primarily because they can serve as an insight into the business owner's creditworthiness and financial responsibility. Lenders often assess personal credit scores to gauge how well an individual manages debt, which can reflect the likelihood of responsibly handling business finances. A strong personal credit history suggests that the business owner is likely to make prudent financial decisions and effectively manage business operations, even if the business is relatively new or has a limited credit history of its own.

This connection between personal credit and business management abilities helps lenders mitigate risk when deciding whether to extend credit to a company, as they infer that a responsible individual is likely to apply the same principles to their business. Therefore, while the other options may touch on aspects of loan evaluation, they don't capture the core reason why personal credit scores are instrumental in assessing a business's potential for repayment and overall financial stability.