One of the most common business errors, many small business owners and entrepreneurs make, related to their personal business and finance. The results are often often a big disaster. And mostly, small business owners don’t even realize the implications. How? Glad you asked.
In a word, credit. In two words, bad credit. This phenomenon usually manifests itself when business owners apply to credit to buy a car, or even get a mortgage. That’s when the big rubber stamp, red, was attached, rejected on the file. Or, when Dunning phone calls from business creditors become more frequent than calls from Aunt Sadie, which has nothing to do than telephone several times a day.
The results of all credit transmission often produce two worst words in the bankruptcy of English, and a lawsuit. Unfortunately, many small business owners don’t even see it coming.
How does this happen? Most often because small business owners use personal funds to launch, or finance their business expansion. This can involve the use of personal credit cards, even issuing home equity loans or home equity credit lines. Commingling this penetrates the corporate veil, which opens it personally for lawsuits. Money goes into business in the premise that the business will return it. But, whoops! When sales down and businesses are not able to make payments, unfortunately everything goes home to perch.
The best is not into this situation from the start, but many small business owners and entrepreneurs don’t realize how they can build separate business credit profiles. And this often produces unfortunate consequences. If they just take the time to investigate how to do it, it can save them with later. But how do small businesses do this?
Build healthy business financial practices from the start. Make sure that when you plan the entrance to the small business arena, you do it carefully, and realistically. Start building your business credit profile immediately. Prepare your company (C or S-) or LLC (Limited Company) correctly. Next Open the IRS website and get your EIN for your business. It’s like a social security number for your business.
Prepare your business bank account, with the same address that you use for your legal documents to the country and the government. Make sure the address is the physical address and not P.O. UPS box or shop. Next is your business phone number and fax. Make sure this information is consistent and accurate. Make sure your business phone number is listed in the Help National Directory 411 with your physical business address. Create your own business credit profile or through Dun and Bradstreet.
Get your business familiar with the vendors in your business arena and get credit immediately. Take a long-term view of what you need to stay operating at a high level. Next, you need to pay your vendor immediately immediately, even if it means skipping your own salary at times (yes, this happens and you have to plan it). You will be surprised, however, on how fast your business credit profile will look rock-solid to business loan officers. And the better it looks, the better your chances of getting some unsecured credit lines, exactly what you want.
There are many falling holes to start or expand the business, but seizing personal and business credit, and finance is one that must be loudly avoided at all costs. And remember, realistic about what you don’t need is not what you want!