SEPARATING YOUR BUSINESS AND PERSONAL CREDIT

One of the hardest things for new business owners to learn is how to keep your personal and business credit separate. Many people have a tendency to mix their credit in ways it shouldn’t be, but there are ways to ensure that that doesn’t happen. It’s important to learn as much as you can about the credit for your business so you can use it in the most efficient way possible.

Business credit, also known as corporate credit, is determined by the top credit bureaus for businesses. They gather information given to them about your payment history and assemble it so that other companies, mostly lenders, can look at it before giving you a loan. Your credit score is determined by payments made on time, late, or early. Obviously you will get a better score with on time payments and no delinquent accounts. It’s important that you start building business credit in the right manner from the start. If you are able to start to establish business credit positively from the start then your business will have a much easier time getting loans and financing.

When you first start building business credit you may find that it isn’t an easy task. You may not be able to get a loan or line of credit from the start. In the cases that you are able to get a loan you may have to provide a personal guarantee. You may find yourself asking what a personal guarantee is. There are many different forms of a personal guarantee however the most common results in you using your personal credit or assets for leverage.

These deals that can be made with the bank have positives and negatives. It makes a great solution for you if you have maximized your line of credit for your business or you are unable to get any type of credit. When you’re establishing corporate credit you will have to be careful of this method.

This will result in the financing corporation running a credit check on your personal background and making you personally liable. You want to avoid this at all costs. While this may seem like a good idea up front it’s usually tragic in the end. You may think that you can use it for a solution temporarily to help with establishing corporate credit however if something goes wrong you may lose your business, personal credit, and personal assets.

It’s also important to know that you will need your business tax ID number to be able to apply for credit cards or lines of credit for your business. So before you can start to establish business credit you will need to acquire this.

Corporate credit can be very difficult to establish at first however you must remember that you should keep your business and personal credit separate. By separating your business and personal credit you reduce the risk of getting the other in trouble if something should happen in your business life or personal life.

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