If you start up your own business today, you may make use of personal resources to finance your venture. Your choices may be limited such as utilizing your savings, borrow money you’re your friends and family or even dip into your retirement fund.
When choosing to mix your personal accounts with your business’ transactions, you risk using your assets for collateral. This can even lead to you personally guaranteeing your mortgage! You may find yourself pushing your personal credit to the limit. Whenever this happens, you may be left to compromise your own financial security that you worked hard to achieve.
Some businesses operate through personal credit cards. However, you should separating your personal credit and their business credit. Separating the two can be very critical and life saving not only for your company but your personal assets as well.
The use of credit cards in small businesses is currently on the rise. Done correctly, this does protect you (the entrepreneur) from losing your personal and business assets and allows opportunities for better growth and organization for your company.
What are the personal advantages when using business credit?
Through separating the personal account with your business account, you are able to protect private assets in case something goes wrong with the financial status of your company. Therefore, your personal (and your families) security may not be subject to be compromised.
If your company goes bankrupt and you have not established corporate credit, you can be held responsible for any of the company’s expenditures both legally and personally. Hopefully you can see that separating accounts gives you added protection on savings and properties that you worked hard for in a long time.
What are the corporation's advantages in using business credit?
Having business credit improves the purchasing power of your company and also helps your company grow. One very good advantage is being able to save a lot of money when it comes to acquiring larger loans. For example, having a good credit profile can provide the opportunity have low interest leases and loans. It also becomes easier for you to add employees, increase inventory and attain discounts for bulk purchases of goods.
Aside from this, it keeps the company’s financial transactions organized as one can more conveniently keep track of the firm’s expenditures, which also gives an easier means to monitor accounting and tax transactions. Most importantly, a company with a stable and reliable account would be able to attract more investors and would have a more organized cash flow system.
For any person who wants to start a business, it is important to be smart and practical in handling finances. By using a separate credit account for that small company, one does not only protect assets, but one also increases the chance of the small business to grow and actually earn more.
When you establish business credit you help your company improve by saving time, money and effort. This will even open opportunities for the business to gain the finances that it needs and develop your company’s credibility.