How do student loans affect business credit? What small business owners need to know

Student loans don't appear on business credit reports. Yet, they can indirectly impact your ability to get business financing through personal credit checks, debt-to-income calculations, and cash flow constraints.

Nearly half of millennials report student debt as a barrier to entrepreneurship. Understanding how your educational loans interact with business credit may help you make smarter financing decisions and build stronger credit profiles.

How personal student loans can influence business financing

Student loans can be a hurdle to starting a business, as the following research has found: 

• More debt may mean you’re less likely to start a business: A “significant and economically meaningful negative correlation” was found between changes in student loan debt and the net formation of new businesses, in research by the Federal Reserve Bank of Philadelphia.
• Every extra $10,000 in student loan debt matters: Research cited by the Education Data Initiative found that an additional $10,000 in student loan debt reduces an individual’s likelihood of starting a business by 7.37%, and those who owe more than $30,000 are 11% less likely to launch a new venture compared to their peers with less or no debt.
• Almost half of millennials notice the impact: Another survey found that nearly half (48 percent) of millennials paying off student debt said their student loan payments have impacted their ability to start a business. That was according to a survey by North Star Opinion Research on behalf of Young Invincibles and Small Business Majority. 

While the research cited above is a decade old at this point, there is no reason to believe the problem has gone away. In fact, both student loan debt and delinquencies (late payments) are rising.

Delinquency payments on the rise

Federal student loan payments resumed in October 2023 after a 43-month pandemic pause. A one-year grace period prevented missed payments from appearing on credit reports until October 2024. Delinquencies began showing up on credit reports in early 2025. 

Among borrowers who were required to make student loan payments, nearly one in four student loan borrowers (23.7 percent) were behind on their student loans in the first quarter of 2025, according to New York Fed research. 

Credit scores are being impacted

Even worse, many of those who are newly delinquent are predicted to experience significant drops in their credit scores. Late payments on education debt can drop your score by 49 to 82 points, according to VantageScore research.

The New York Fed research predicts even greater score drops for those who fall behind on their student loan payments after the payment pause: 

Sources: New York Fed Consumer Credit Panel/Equifax; author’s calculations

Student loans and financing: 4 connections

There are a number of ways student loan payments may affect whether you can get small business financing. 

1. Personal guarantees may require credit checks

Many small business loans require personal guarantees (PG), especially for newer companies. Lenders often check personal credit for loans with PGs. 

2. Blended scoring models use personal and business credit

Referred to as “blended scores,” some business credit score models can analyze both personal and business credit data to calculate a score. Scores that may use both source of data include: 

• FICO^® SBSS^sm score 
• Experian Intelliscore Plus^SM
• Equifax Business Delinquency Score^TM 
• Equifax Business Delinquency Financial Score^TM

In these cases, student loan data that appears on your personal credit scores can be included in the final score that is created. 

3. Business credit cards often require personal credit checks

Most small business credit card applications involve personal credit checks, usually because they also require personal guarantees. 

4. Debt-to-income ratios may matter

Some lenders require a personal financial statement especially for larger loans with personal guarantees. When they do, they may consider your personal debt-to-income ratio. Monthly student loan payments can be included in this calculation. 

Direct vs. indirect ways student debt impacts business credit options

Student loans may directly or indirectly impact your credit and/or your options for small business financing. 

Here are several examples: 

Direct impacts

• Underwriting tied to personal guarantees may examine student loan payment history
• Borrowers with defaulted federal student loans may be ineligible for SBA loans
• Personal debt-to-income calculations may include monthly education loan payments
• Blended credit scores factor in personal student debt appearing on personal credit reports 
• Credit inquiries for private student loans may appear on personal credit reports and impact credit scores

Indirect impacts

• Loan payments can impact personal cash flow, making it harder to invest in the business
• Stress from debt can affect business decision-making 
• Lack of emergency funds may force business owners to rely on expensive financing

The indirect effects often prove more damaging than direct credit score impacts. A Kauffman Foundation study found that student loan payments reduce cash available for entrepreneurial activities.

Strategies to help protect your business credit when you have student loans

If you have student loan debt and are trying to run a business (or want to), you may find it stressful to juggle both. Here are some strategies to consider: 

Explore federal loan repayment options 

There have been a number of changes to student loan repayment options in the past few years, so if you haven’t looked at federal student loan repayment options recently, you may want to revisit them. If your student loans are in default, student loan rehabilitation program may help you get back on track. 

Separate your finances

Creating a clear separation between your business and personal finances can help you budget and better understand your finances. Consider getting a dedicated business checking account and/or business credit cards that report to commercial bureaus.

Build business credit 

Building business credit may help your business move away from financing that requires personal guarantees. Open trade accounts with suppliers that may report to Dun & Bradstreet (D&B), Experian, and Equifax and then pay on time, or even early. The D&B PAYDEX^® score, for example, may reward early payments with a higher score.

Read Nav’s guide to learn how to establish business credit. 

Automate your finances

Think about setting up automatic payments for personal and business debts. This can help prevent late payments and protect your credit scores since late payments often cause credit scores to drop. 

Monitor your credit 

Check your personal and business credit on a regular basis. Student loan servicers or other lenders can make mistakes, and those mistakes can affect your credit scores. 

Nav helps you check, manage, and monitor business and personal credit in one dashboard.

Alternative financing for business owners

When traditional lending becomes challenging due to student debt, you may want to consider other options.

Microloans 

Microloans are smaller loans that may be made by CDFIs, nonprofit lenders that focus on underserved borrowers and may offer more flexible underwriting. 

Revenue-based financing 

This type of financing, which includes merchant cash advances and invoice factoring, offers an advance against future revenue. Approval is often based on revenue or invoices, and credit score requirements may be very flexible. 

Equipment financing 

When you need specific equipment, equipment financing may be a viable option. This type of financing may not require good credit, and instead focus on the asset's value and business revenue.