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Should I use personal credit to fund my business?
| Guest post by: Joe Ferriolo |
Article Overview: Have you heard the saying when you don’t need it, it is there; and when you do need it, it is not there? We have seen many small business owners in this position when it comes to business financing. Do yourself a favor and put your company in a good financial position. Secure your business credit before you need it.
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Free Download - What affects your credit score? By Joe Ferriolo |
Should I use personal credit to fund my business?
Have you heard the saying when you don't need it, it is there; and when you do need it, it is not there?
We have seen many small business owners in this position when it comes to business financing. Do yourself a favor and put your company in a good financial position. Secure your business credit before you need it.
Using your personal credit is possibly the worst thing you can do for you and your business. We have see business owners make this mistake time and time again. If you use personal credit to fund your business it can have a long-term negative effect on you and your business. Common forms of personal credit used are credit cards, home equity lines of credit, etc. Using these forms of credit can stop you from obtaining business credit lines.
How business credit works?
Banks are stricter on extending business credit. Most banks now ask for the business owner to be the credit guarantor. This means that if the business does not pay its obligations you are personally held liable. An underwriter or bank will first look to your personal credit. If you are using more than 50% of the available credit on your personal credit cards and home equity lines of credit this could result in you getting declined. Before applying look at the balances owned on your personal credit and try to pay them down. This will help you to receive a better business credit approval.
Keep Business Credit Separate from Personal Credit
Some business banks will not report the business debt to your personal credit. Check with the bank before applying and see if they report to your business credit report and not your personal credit report. By using business credit it will help with your accounting at the end of the year. Having business expenses separate from personal expenses will make your life easier. Lastly, your business debt will be separate from your personal credit keeping your Fico scores higher. This will result in better terms when you need to use your personal credit. Your business debt may not show on your personal credit report.
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Article Tags: better business, business banks, business credit lines, business credit report, business debt, business financing, business owner, credit approval, credit check, financial position, guarantor, home equity lines, home equity lines of credit, nbsp, personal credit cards, personal credit report, small business owners, style text, text decoration, underwriter
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About the Author: Joe Ferriolo RSS for Joe's articles - Visit Joe's website Joseph Ferriolo has been in the financing industry for 15+ years. To say the least, he has seen a lot of changes over this time. Each passing year has enabled him to see new ways and avenues of making loans work. He started in large traditional banking institutions doing credit analyses and underwriting. He eventually, took his experience in finance and put his passion into creating his own business ventures. He found that a lack of cash flow can stop a successful business in its tracks. This is why he developed a company that helps business owners obtain financing for their small business. He commonly says "getting a loan has become an art form. Simple mistakes can stop your business from getting the capital you need to get through the slow seasons." Learn and benefit from his ventures, mistakes and life experiences in business financing.
Joseph Ferriolo CEO of Wise Man Finance Click here to visit Joe's website   Business Credit Cards versus Personal Credit Cards SBA what is the Transition Phase Alert System Should I use personal credit to fund my business SBA Guarantee Fee Coming Back What is the SBA Recovery Loan Queue |
Related Forum Posts
Business Cash Advances
- Typically, businesses that are open for at least 6 months and do at least $3,500 a month in credit card sales are usually eligible for cash advances or working capital. Based on credit card sales, these type of companies, rather than using your personal credit and/or assets for collateral will fund you based on your past and present credit card receivables. They are generally repaid on a fixed percentage each time you close out your merchant terminal until your loan is satisfied. No specific loan terms.
It differs from a business loan or lines of credit because your personal credit doesn't come into play,you dont need a down payment, you dont need a business plan and generally for loans under 100K they do not even require tax returns or other financial documentation. There is also no specific term for the time you have to pay it back.
Has anyone had any experience working with companies like this? Was it a good experience or a bad experience; and why?
Unsecured Lines of Credit
- I have found that building a strong business credit profile allows for many commercial credit lines that I don't have to personally guarantee. Within 3-4 months I have recieved credit lines under my business name with Home Depot, Lowes, Staples, and Dell Computers. I wish I knew about business credit when I first started my business.
How long before a bank would touch you?
- Most banks here don't want to lend money to startup businesses because they are risky and have a higher default rate.
Unless you provide some kind of personal collateral or have a good personal credit history, banks usually like to see 2 years of business experience before they give you a loan.
What has your experience been?
Re: Unsecured Lines of Credit
- Hello, creditguru:
Thanks for the recommendation. Here are two questions for you that will further help our forum members to make use of your suggestion:
1. How [u:p6n6npsx]does[/u:p6n6npsx] a business establish a strong business credit profile? (Especially small business and home business.) Please provide some tips or guidelines on how to do this effectively.
2. Commercial credit lines can be helpful to a business, but they do require responsible management on the part of the business owner. What tips, recommendations or cautions can you offer to business owners who are considering commercial lines of credit?
Thanks.
GT :-]
Do you accept credit cards?
- Hi Everyone,
I'd like to know if your business accepts credit cards for payment and if so, which ones?
In addition, what percentage do you have to pay the credit card company per transaction?
Lastly, what does it cost to have one of those machines that accept credit cards?
Thanks
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