Credit can be both a help and a hindrance. When you need a boost to your cash flow or to make a major purchase that you don’t have the cash for, then credit can help keep your home business humming without a glitch. But, taking on credit and debt is a financial obligation that many fledgling businesses just aren’t ready for.
Getting credit in your business name (as opposed to personal credit) can be tough. You will need to have all your ducks in a row and be able to demonstrate stability and viability for your home business. Some people start out with credit cards, while others look for a line of credit from their financial institution. If you are doing your business banking where you have done your personal banking, it might be an easier “leap” since they likely already know you.
The way your business is structured will also have an affect on how you establish and manage credit. If you are a sole proprietorship, then the credit will really be under your name. However, if you have established your business as a separate corporation, then the personal and business credit can overlap. Keep in mind that you will ultimately be responsible and should be wary of how much debt you can personally carry. However, in the event of a bankruptcy, how the debt is taken care of can be influenced by the business structure.
Just like personal credit, you’ll want to get the best rates available and look for ways to establish credit without a huge obligation. It might be that a credit account with a local office supply store is all you really need to help your business run more smoothly–instead of taking out a credit card or line of credit at the bank. When in doubt (and business credit can be as confusing as personal credit), see your banker or a financial advisor to help you keep your business in the black.
See Also: Cash, Checks, or Credit for a Home Business
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