When business owners use personal credit card to pay for business expenses, the debt of the business reports back to their personal credit reports which lowers their scores because their business debts hurt their personal debt to income ratio
To help prevent business owners from damaging their personal credit, every business owner should follow the simple steps of establishing business credit. By establishing business credit the debt of the business will report to the business credit file and not the personal credit file. Establishing business credit will also help the business build a strong business credit file so loans, lines of credit won’t require the business owner to sign a personal guarantee.
Here are just a few reasons why every business owner should establish business credit.
1) Establish creditability. You can’t expect to walk into a bank and ask for a business loan with no business credit or business history. By establishing a good business credit profile you will be able to secure the financing your business needs.
2) If your business should fail, you would still be legally responsible if you used your personal credit to finance your business
3) Saving money. That’s right business credit rates are typically lower than personal credit rates. A few percentage points in interest mean thousands of dollars in the long run
4) Float your business through tough times. Even though everything makes be going great currently, you never know when your company will take a turn for the worse or when economic times might change. By establishing business credit you will be prepared for the down time.
5) Get the money you need. Let’s face it, without the money you need to finance the launch or expansion of your business you really won’t be in business at all. Don’t make the mistake of using your personal finances to finance you business.
There are many, many more reasons why you should establish business credit. We have all heard the saying, “keep business expenses separate from personal expenses,” right? The only way to do that is to set up your business properly in the first place by establishing business credit.
To learn more, consult with the experts at CL King and Associates. We co-manage bond offerings, IPOs, follow-ons, secondaries, convertibles, and preferred. CL King has acted as Co-Dealer Manager on Verizon’s $1.9 billion cash tender offers for 8 series of debt securities of Verizon and many such big companies.
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