The Need For Separate Credit For Business
Robert Bain
Never allow your small business finances to overlap with your personal finances. This is a very serious issue that you need to pay attention to. If you are reading it and then saying that you can make it work because it is easier you need to re-evaluate your attitude about it. Yes, separate finances can be difficult but it can also be very beneficial to both you as a person and to your small business.
My husband is self employed and that is a piece of early advice we got from many directions. We chose to follow it even though I will admit I didn't want to at first. I figured we could just put all the earnings in one account and pay the bills from it as we had always done. I didn't want to have to juggle another checking and savings account as I have my hands full as it is!
The law doesn't make small business owners separate the two entities so you don't have to. You will also find that lenders don't encourage you to do it. From their point of view there is less of a risk if your small business credit is attached to your personal credit. Should you not be able to repay the funds they can come after everything you have from either direction.
Of course the credit limits have increased while the interest rates have continued to drop. They want to keep us happy and to tell you the truth I am not interested in looking for such credit forms anywhere else. I love the fact that they gave us a chance and that means a great deal to us. Too many other lenders wanted us to use our personal credit and even our home as collateral for such business accounts.
You have to understand that any small business has a great deal of risk associated with it. More than half of them won't make it for the first full year. This is a sad reality that you have to understand when you start a small business. This is why you don't want your personal credit to be associated with it. You may find it hard to move on when your business dreams didn't work out but at least you will still have your car to drive and your home to live in.
Financial difficulties are the major reason that so many small businesses fail. When you have the finances for yours separate from your personal finances you can see the big picture clearly. You won't have a false sense of security that things are going to be fine. This can help you to curb spending on business items that aren't a necessity at this time. Hold off until you have the profits to buy them.
It will become a regular habit to keep your small business and personal finances separate if you do it from the very beginning. You need to have a solid plan in place so that you can segregate the two of them. It will be more time involved initially but soon you will get a good system in place to take care of it. You need to be willing to heed this information if you want to protect both your business and your personal assets.
Never allow your small business finances to overlap with your personal finances. You need to go about things in the right way so that you can make it work for you. No one starts a small business with the belief that it won't work out for them. Yet that is too often the scenario that plays out. So protect all you have worked for that whatever happens you won't be jeopardizing your personal assets that you have worked so hard for.
About the Author:
Robert Bain writes all about small business. Discover the difference between business credit and true corporate credit that the banks are hoping you don't discover.
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