Business Finance and Credit
Why Should I Separate my Personal Credit from my Business Credit?
Most people who want to start up their own businesses today usually make use of personal resources to finance their ventures. They either utilise their savings, loan money from significant others or even use their retirement funds instead of obtaining separate business finance or credit facilities. Due to mixing their personal accounts with those of their business” transactions, these people often risk utilising their major assets for collateral, give personally guaranteed business mortgages, and so on. They often end up pushing their personal credits to the limit. And when this happens, your personal financial security is severely compromised. It is sad to say, however, that a significant percentage of small firms operate through personal credit cards. What these people should realise and should be doing in running their ventures is separate their personal credit and their business credit and realise just how important this is, not only for the company, but for their personal assets as well. Unfortunately due in part to the awful economic climate, the use of personal credit cards in small businesses is currently on the rise. What you as a business owner must do is cease the practice. Business finance is business credit only. What this does is that it protects both of the entrepreneur’s personal as well as business assets and allows opportunities for better growth and financial structuring of the organization.
Personal Advantages in Using Business Credit
Through separating the personal account from the firm’s business account, one is able to protect private assets in case something goes wrong with the financial status of the company. In that way, one’s personal security (especially for those with families) would not be compromised. In instances where a firm that goes bankrupt does not have corporate credit, proprietors can be held responsible for any of the company’s obligations both legally and personally. Separating accounts enables added protection on savings and properties that have taken years of toil and sweat to accumulate.
Corporate Advantages in Using Business Credit
Owning a business credit could also improve the financial flow of one’s company as well as help the company grow. One very good advantage is being able to save a lot of money. By having a good credit profile for the company, business owners have the option of lowering interests for leases and loans. It also becomes easier for the company to add more employees, raise inventory and attain discounts for 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 looking to start a business, it is important to be smart and practical right from the start in handling finances. By using a separate credit account for that small company, one not only protect assets, but one also increases the chance of the small business growing and eventually being more profitable. The use of separate credit accounts will help your company to improve by saving time, money and effort. This will even open opportunities for the business to gain the financial support that it needs and develop the company’s credibility. In conclusion, all smart entrepreneurs wanting to succeed in their business venture whilst at the same time protecting their personal assets will surely ensure they separate all personal credit from their business credit.
Other Resources: Business Strategies