In the past during good economic times you may have become accustom to using personal credit cards to finance purchases, equipment, and even payments to suppliers or vendors when starting and operating your business.
Unfortunately times have changed for business credit for small business and what has become a shocking reality to many are the ramifications of what the co mingling of personal credit files for business financing has resulted in.
Many small business owners who have followed the traditional route of personally guaranteeing each and every credit card, credit line, or loan for business have come to realize that they have put their personal assets and family at risk!
The single greatest challenge during these tough economic times facing small business in America is adapting to change. Less than ten percent of business owners in America know how to truly separate their personal credit from business credit let alone understand how to set up a business credit profile an establish a good rating.
So what is business credit?
It’s the ability to obtain financing under the name of your business entity without using your personal credit or personal guarantee. Business credit should be separate and based on the corporation’s credit worthiness not yours! Recently Entrepreneur Magazine was quoted as saying “You should differentiate your personal credit from your business credit.”
If you own a separate legal entity for your business than you have a unique opportunity that no other individual or sole proprietor has. It’s the ability to establish a business credit profile that is completely separate from a personal credit profile.
If you think you’re business is just making it fine despite the current economic times and you don’t need the credit think again! The reality is that your business will at one point require an influx of cash in order to cover unforeseen operating expenses, development, expansion, legal fees, inventory or a range of other items that a business may require in order to grow.
One of the key advantages of having business credit is instead of putting your personal credit and assets at risk every time your company requires financing you would now be in a position to secure the financing you need with your businesses’ credit. Some other benefits you can expect include:
…any debt you accumulate for the business would only report to your business credit file not your personal credit file.
…eliminating the co-mingling of funds–and this includes the “co-mingling” of credit profiles so you won’t jeopardize the protection of the corporate veil.
…protecting you and your family from personal liability when you get approved solely on your businesses’ credit file.
…improving your personal debt to credit limit ratios by transferring the balances of business debt used with your personal credit to your business credit.
…increase your businesses’ ability to obtain cash credit 10 to 100 times greater than you can obtain personally.
…SAVING MONEY! For example, an individual might pay up to 13% interest on a $100,000 line of credit whereas a business could qualify for an interest rate of 7%. That would save you almost $40,000 in interest alone.
After the recent economic downturn small business owners like you are facing a new era when it comes to business financing. Banks, lenders, suppliers, leasing companies and others are making adjustments, adopting new rules, and facing new regulations in the lending arena.
Now more than ever you need to be pro active and establish a new level of financial preparation which includes establishing a strong business credit profile, a favorable business credit rating, and a solid bank rating. I encourage you to start building your business credit today and enjoy the benefits and peace of mind that comes with it!
To Your Success!
Marco Carbajo
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of http://www.startbusinesscredit.com . Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below =>
After presenting to REIA of Macomb last week it was clear to me that building business credit was a HOT topic for real estate investors. It was interesting to find that small business owners and real estate investors have similiar questions when it comes to business credit.
Statistics show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name. The others continue to use the owner’s personal credit cards for business transactions.
I get asked this question quite often and thought I would clear the air on what business entity selection is best for building business credit. This step by far is the most important because it’s the foundation of your business credit. Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.
