Have you ever wished that you knew ahead of time how to avoid mistakes that will cost you money? Do you realize that when it comes to your business, these mistakes can cost you thousands of dollars? Well my goal is to help you. I can tell you how to avoid some of the most costly mistakes so that you stay on the right track to making money, instead of losing money.
1. Not setting up your business in the correct Business Structure. Many new business owners dont think they need to set up their company as a legal business entity because it's only them working. They dont think its a problem to combine their business accounts with their personal accounts. Regrettably, this mixing of money and expenses causes a huge problem for the new business owner. If they keep their business and personal activity separate, they present to the taxing authorities (Uncle Sam) an obvious picture that they are functioning as a business and not as a hobby.
Always keep in mind that a loan to an individual is considered a personal loan - and its reported to the personal credit bureaus. However, a loan to a corporation, partnership or LLC, is reported to the business credit bureaus " if they have used their EIN on their application. Personal FICO scores are, therefore, not affected (if there is no personal guarantee on the loan). A business will look more professional in the eyes of a lender or bank if they are set up as a business entity. This is critical in the business world.
2. Not presenting your business as an established business. What I mean by this is that your business has its own address and phone number. Im not saying you cant work out of your home, what Im saying is that to the business credit world you must show your business as having its own address. It is absolutely necessary that your business be listed in the national 411 directory with a matching address. A lot of small business owners use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender will usually call 411 to verify your business and expect to find a specific address and business phone number. Lenders dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must also match the address listed with the State in which the business is registered because the financial institutions will go onto the States website and verify your business information and if they dont find a match, you may be denied.
3. Not checking your credit report. You should already know how important it is to regularly check your personal credit reports for accuracy, but its also important that you check your business credit as well. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get business credit because of negative data on your personal credit report. This holds true for business credit. If false or negative information is reported to D&B (the most well known business credit agency), you may be denied credit. Financial institutions are looking to lend money only to businesses that are a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with all the credit agencies. It is up to you to verify the accuracy on a regular basis. - 15246
1. Not setting up your business in the correct Business Structure. Many new business owners dont think they need to set up their company as a legal business entity because it's only them working. They dont think its a problem to combine their business accounts with their personal accounts. Regrettably, this mixing of money and expenses causes a huge problem for the new business owner. If they keep their business and personal activity separate, they present to the taxing authorities (Uncle Sam) an obvious picture that they are functioning as a business and not as a hobby.
Always keep in mind that a loan to an individual is considered a personal loan - and its reported to the personal credit bureaus. However, a loan to a corporation, partnership or LLC, is reported to the business credit bureaus " if they have used their EIN on their application. Personal FICO scores are, therefore, not affected (if there is no personal guarantee on the loan). A business will look more professional in the eyes of a lender or bank if they are set up as a business entity. This is critical in the business world.
2. Not presenting your business as an established business. What I mean by this is that your business has its own address and phone number. Im not saying you cant work out of your home, what Im saying is that to the business credit world you must show your business as having its own address. It is absolutely necessary that your business be listed in the national 411 directory with a matching address. A lot of small business owners use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender will usually call 411 to verify your business and expect to find a specific address and business phone number. Lenders dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must also match the address listed with the State in which the business is registered because the financial institutions will go onto the States website and verify your business information and if they dont find a match, you may be denied.
3. Not checking your credit report. You should already know how important it is to regularly check your personal credit reports for accuracy, but its also important that you check your business credit as well. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get business credit because of negative data on your personal credit report. This holds true for business credit. If false or negative information is reported to D&B (the most well known business credit agency), you may be denied credit. Financial institutions are looking to lend money only to businesses that are a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with all the credit agencies. It is up to you to verify the accuracy on a regular basis. - 15246
About the Author:
Find out more about setting up business structure correctly, and learn more tips to present your company to the world as being well established. Get the information you need so you can obtain lines of credit and vendor credit cards for your business without putting your personal credit at risk.
