Business Credit – Essential For Small Business
♫ Tuesday, October 28th, 2008If you’re about to start a new business or currently running a small business, establishing a business credit is a great idea. The most important fact for establishing business credit in small business is that lending institutions, credit card issuers and vendors will establish business credit without the need of any personal guarantee. As everyone knows, a personal guarantee involves using your personal credit information to guarantee repayment of the debt incurred by the business. Well explained, you are fully responsible for the repayment of the credit. It doesn’t mean that you do not have to repay the cash obtained through business credit. It may be your intention to fully repay any debt incurred by the business; however, obligating your personal and business assets to repaying business debts can lead to financial ruin if any business setbacks occur.
You won’t be able to distinguish your business credit from your personal credit if you are the sole proprietor of your business. In order to establish business credit without a personal guarantee you must structure your business as a separate legal entity such as a corporation or limited liability company. Even if you have been doing business as a sole proprietor for years, you can restructure your business into a separate legal entity. Besides, it is a better choice to set your business up as an entity separate and apart from you. Your business could get sued and if all of your assets are tied together, financial ruin may be lurking in the background. Having a separate entity protects your personal assets.
