Credit For Small Business: Top 4 Reasons To Stop Using Personal Credit

Credit For Small Business: Top 4 Reasons To Stop Using Personal Credit

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Statistics show that over 65% off all business owners use credit for small business purchases on a consistent basis; but the challenge is less than 50% of those credit cards are in the business name. The others continue to use the owner's personal credit cards for business transactions.

Using your personal credit, also known as you're "Consumer Credit Profile," instead of establishing and using business credit is a bad idea on many fronts.

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.

Here are my 'Top 4 Reasons Why You Should Not Use Personal Credit for Business.'

Reason 1

It impacts your personal debt to credit limit ratios, credit scores, and personal finance capacity for you and your family.

This reason alone has caused severe personal credit damage and liability to small business owners across the country who have lost their businesses due to the recession and have used personal credit and personal guarantees for all their business financing. Just ask Kirk Brown, owner of Buck's Shoes in Fremont, who knows firsthand what using personal credit for business can do.

When you separate your personal credit from business credit the debt you accumulate under your business should only report to your business credit file not your personal credit reports. More importantly you protect you and your family from personal liability when you get approved solely on your businesses' credit file.

Reason 2

When you use your personal credit for the benefit or operation of the company it can lead to an "alter-ego" decision by regulatory or a financial organization, and a piercing of the corporate veil.

This would directly endanger the owner's personal assets and make the owner or owners directly liable for the penalties or repayment of any debts incurred by the business or corporation.

It's always a good idea to build business credit rather than abandon it through the co-mingling of funds'and this includes the "co-mingling" of credit profiles.

Many entrepreneurs believe that owning a separate business entity protects them but you can jeopardize that protection when you use personal credit for the benefit or operation of your corporation!

Reason 3

Another disadvantage of using your personal credit in place of proper business credit is the fact that the use of personal credit for the operation of a company can make your company appear improperly funded or operated, or may incorrectly establish that your business credit is unstable, unreliable, or overextended.

Reason 4

Last but not least what might be perfectly normal and acceptable for a business credit profile, such as submitting multiple applications for business credit, can have a serious negative impact on personal credit because of what's called excessive inquiries.

Solution:

Start building business credit for your company separate from personal credit and enhance your company's image, protect you and your family's assets, credit capacity, and personal liability.


Copyright (c) 2009 Marco Carbajo

About the Author:
About the Author

Marco Carbajo is a business credit expert that shows you how to separate personal credit from business credit. 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 at: => http://www.businesscreditblogger.com



Article Originally Published On: http://www.articlesnatch.com


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