Why Not To Use Personal Credit For Your Business
Credit is extremely important. It helps many aspects of your business, especially with cash flow. But the differences between Personal and Business credit are numerous, and when thinking about using your personal credit to help your business, you should think twice before acting.
Personal Risk Associated With Business Performance
When using personal credit and your own credit cards for business purposes, you risk your own individual credit score. Taking a loan in your own name, rather than the business, puts your credit on the line, yet the ability to pay back the loan on time depends on your business’s performance over the period of that loan. Experiencing delays in payments over time would lower your own credit score.
In addition, applying for some loans could require collateral that may be a personal asset. Putting these valuable personal assets up for a loan that hinders on your business’s success is a risky move. Even when you may not have to put up collateral for a loan, personal loans often have a much lower limit than a business loan your company may need to function better.
Not Building Business Credit
There are many benefits to using business credit for your business, most importantly simply building your business credit over time.
Over time, your business will want to begin building credit itself for the future. Like personal credit, potential lenders will be looking at this score to help determine your business’s ability to pay its bills. Not to mention, other businesses your company works with can sometimes check this score to help decide if they want to do business with you.
Plus, when interest fees on business loans can be tax-deductible, this is an advantage many businesses won’t want to abandon.
You want your business to have the best chance at success. A personal loan used for your business could make you, the business owner, personally responsible for the debt of your company. Business credit helps your own business and remove your personal assets from being at stake in attempting to build your business.
If now is the time your business needs a loan, contact KLC Financial at 952-224-4300 or firstname.lastname@example.org for your company’s equipment financing or leasing needs.