DEBT-TO-INCOME RATIO

Whether you're preparing to apply for small business credit based financing or simply need to know where your small business stands financially, regularly monitoring your DIR is one step towards understanding your financial position. It's a good idea to recalculate your DIR at least once a year, or before any important turning points in the business.

THE REAL RISK OF BORROWING

Collateralizing your car...selling your most valued items...second mortgaging your already overvalued home.... The list goes on and on. Recently, StrongBusinessCredit heard from a musician who sold his equipment to raise more capital for business advertising. What's not right with that picture? Desperate times for business funding leads to outrageous actions.

Perhaps your situation is not as horrific as selling the very equipment that you may rely on to run your business, but tying in any personal items to get through a rough spot is a definite move in the wrong direction. Unsecured personal loans are not tied to any asset; another horror story we hear often. With this type of loan, you are typically going to pay an extremely high interest rate, have a less-than desirable line of credit, and personally guarantee the outcome. Unsecured lines of credit are secured by the most important factor-you! Essentially, by taking out an unsecured line of credit, the business owner is more responsible for the debt than any other lending option.