The 9 Most Devastating Mistakes Business Owners Make When Financing Their Business

Discussion in 'Articles & Tutorials' started by TCCDepot, Jun 7, 2012.

  1. TCCDepot

    TCCDepot
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    Special Alert Bulletin for Entrepreneurs and Business Owners Who Need Business Financing …

    The 9 Most Devastating Mistakes Entrepreneurs and Business Owners Make When Financing Their Businesses … and How to Avoid Them

    Which of these all-too-common mistakes will cost you your business, peace of mind … and even your home? Find out inside – and also discover how to get financing for your business… WITHOUT Risking Your Personal Assets, Lowering Your Personal Credit Score, and eventually, without a personal guarantee.


    Devastating Mistake #9
    Using personal credit to finance your business



    The hands-down biggest and most common mistake entrepreneurs make is using personal credit to finance their businesses. Common examples include:

    • Paying for business expenses with your personal credit cards

    • Obtaining personal loans to finance your business expense

    If you’ve used one or more of these financing methods to fund your entrepreneurial ventures, I’m not surprised. Shockingly, many business-start-up experts recommend these methods for funding new businesses.

    Their advice is well-intentioned … but nonetheless incredibly dangerous. The reason for not using your personal credit for business purposes is simple: You WILL destroy your personal credit. It’s inevitable.

    By using your valuable personal credit for business expenses, you run the risk of:

    Lowering your personal credit score. When you personally guarantee business-related financing, the lender will require a personal credit check. Every time an inquiry into your credit history is made, your personal credit score takes a hit. The lower your score drops, the harder it is to secure financing…especially financing with the most favorable terms.

    Reducing the amount of credit available for personal use. The more credit you have personally guaranteed for your business, the higher your debt-to-income ratio soars … and the less that lenders will be willing to give you for personal use. Signing that loan for your business could prevent you from getting a mortgage on the new house you plan to buy a year from now.

    Losing everything. When you use your personal resources or credit to finance a business, you chain your financial security to your company’s success. If the company fails, you’ll be left holding the bag … and your personal finances will sink along with your business. You’ll never recoup the “loan” you took from your retirement account to get your business launched. Creditors will be calling you for payment. And if things get bad enough, you may have to declare bankruptcy.

    To protect your financial security, don’t use your personal credit to finance your business activities. Instead, take action to secure credit in your company’s name – WITHOUT Risking Your Personal Assets, Lowering Your Personal Credit Score, and eventually, without a personal guarantee.


    If you would like to continue reading this article, you can click on the following link:
    9 Mistakes Funding Your Business

    I hope this information is valuable to everyone. Our company knows that small businesses are having a tough time and that the government hasn't done much to help us out. That's why we have tried to step up our game, get information out to the public, and help as many small businesses or business owners as we can. Business Credit will help turn this country around and get the unemployment rate down. We as a whole need to learn how to spread the word and get involved with Corporate Credit & Business Credit. For more information on our company, what we do, & how we can help you, please see the links below. Have an amazing day everyone!

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  2. Choice Checks

    Choice Checks
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    Extremely great and useful information. It is hard when you got to use your own money before moving the company to a LLC or something different. I had do that 6 yrs ago and now i keep everything separate and not mix it.
     
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  3. harryt

    harryt
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    Sometimes you cannot avoid that, especially when you start out. Personal security (or credit) is often all a budding entrepreneur has. I have had experience with client who had to put it all on the line. You must just make sure you have a good market and a good product. Then get out of your personal guarantee as soon as you can. I have had experience with people who did this very well and made built their wealth very nicely. However, they has substantial business smarts. In other cases I have seen people use their own money to prop up a failing or doubtful enterprise. In the first instance it can be regarded as a prudent risk, in the second it is "throwing good money after bad" because we don't know when to give up.
     
  4. TCCDepot

    TCCDepot
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    I agree with you Harry, some people that have a good plan and good market can def succeed using their own money. The information I posted was to allow existing companies the opportunity to get information to help them avoid using their personal finances and assets as collateral. At the same time, I'm hoping to reach entrepreneurs that haven't even begun creating their company so that they can follow the correct process and never have to use a personal guarantee. Now, don't get me wrong, owners will still need to use their FICO score as most creditors want to see their scores...they just won't report to their personal credit, only business credit.

    David, congratulations! Most businesses don't make it past the 5 year mark according to the SBA but you did and now you have no personal liability, AWESOME!!!!
     
  5. harvestllc

    harvestllc
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    Exactly, especially if you engaged your business in lending corporations, that's a big no-no. Most or should i say all your profits would be only beneficial to the lending corporations.
     

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