Friday, October 31, 2008

Benefits of Separating Personal Credit from Business Credit - Building Credit for Your Business

Sometimes, people who intend to go into businesses may consider the option of using personal financial resources to fund their ventures than building business credit. Some things people use to start a business are personal savings, using their retirement funds and even, the worst thing in the world, getting a loan from family and friends. These assets can also be used to further expand an existing business to impel growth and expansion.

You may think that using personal assets for your business would be a much easier thing to do than trying to get business credit. The long term benefits for your business are tenfold when you separate your business credit from your personal credit.

The major benefit is you’re avoiding risking you and your family’s personal assets. You can’t deny that owning your own business is a risk, whether you’re having success or dealing with financial challenges. Using personal assets to fund a business (especially a troubled one) just increases stress if you’re a business owner and can really make things worse.

Apart from the personal liability, a business owner may also be vulnerable to whatever legal actions resulting from an impending bankruptcy. To protect one from having to go through these adverse consequences, it would be best to separate personal and business finances early on and start building business credit history.

Your business will benefit in using it’s available credit to fund day to day operations. Well you would account for all spending much easier using the funds allocated for your business. This makes it easier for you to organize your documents correctly should you need to apply for more credit. In general, this would help you be more efficient in managing the business.

Having its own business credit would also help an enterprise build a favorable business credit score. You can get this by paying on time and using your credit funds efficiently. A year or two of practicing this and the business owner can actually approach another lender for business credit with higher credit limit, lowered interest rates, and flexible payment terms.

However, there are still some lenders who would require some sort of collateral before they approve your credit application. If you really have to, get a good interest rate so you can make your payments on time and improve your chances of getting unsecured business line of credit the next time around.

For more information on building credit for your business go to

No comments: