Too many business owners are using their personal loans to finance the launch, expansion or growth of their business. A majority of business owners have no idea what business is or how to establish it. By following a few simple steps any business owner can establish business credit. Therefore, separating their personal credit from their business credit.
When business owners use a personal credit card to pay for business expenses, the debt of the business reports back to their personal credit reports. This lower their scores because their business debts hurt their personal debt to income ratio.
To help prevent business owners from damaging their personal credit, every business owner should follow the simple steps of establishing business loans. By establishing it the debt of the business will report to the business lending file and not the personal loan file. Establishing commercial loans will also help the business build a strong business credit file. So loans, lines of lending won’t require the business owner to sign a personal guarantee.
Here are just a few reasons why every business owner should establish business credit.
- Establish credibility. You can’t expect to walk into a bank and ask for a business loan with no business credit or business history. By establishing a good commercial loans profile you will be able to secure the financing your business needs.
- If your business should fail, you would still be legally responsible if you used your personal credit to finance your business
- Saving money. That’s right, business credit rates are typically lower than personal credit rates. A few percentage points in interest mean thousands of dollars in the long run
- Float your business through tough times. Even though everything is going great currently, you never know when your company will take a turn for the worse or when economic times might change. By establishing commercial loans you will be prepared for the down time.
- Get the money you need. Lets face it, without the money you need to finance the launch or expansion of your business you really won’t be in business at all. Don’t make the mistake of using your personal finances to finance your business.
There are many, many more reasons why you should establish commercial lending. We have all heard the saying, “keep business expenses separate from personal expenses,” right? The only way to do that is to set up your business properly in the first place by establishing business credit.
