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August 18, 2009Two years ago I and my partner form a corporation. I believe that the bank granted us a line of credit because the credit record of my partner was good (better than mine, then). Now, our business is in troubles (it is related with real estate sales). Till now, we have paid punctually to the bank every month the minimum payments.
It would be rare that a bank would issue a line of credit to a company or corporation without also having you sign for it personally. With that in mind, your personal credit will be affected.
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Horaayy..there are 3 comment(s) for me so far ;)
It would be rare that a bank would issue a line of credit to a company or corporation without also having you sign for it personally. With that in mind, your personal credit will be affected.
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Using your personal credit to finance your business is probably one of the biggest mistakes one can make as an entrepreneur. For one thing, it’s dangerous! You should NEVER use your personal credit for business expenses because….
you will destroy your personal credit.
When you personally guarantee business-related financing, the lender will perform a personal credit check. As you probably know, every time an inquiry is made, your personal credit score takes a hit. The lower your score, the more difficult it is to secure financing.. especially financing with the most favorable terms.
Then as you continue to seek more financing, you reduce the amount of credit that is available for personal use. Plus, the more credit you have personally guaranteed for your business, the higher your debt-to-income ratio soars… and the less lenders will be willing to give you for personal use. Getting that loan for your business could prevent you from getting a mortgage on the new house you want to buy next year.
Bottom line… 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 go down with it. You’ll never recoup the "loan" you took from your savings to get your business started. Creditors will call 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, or damaging your personal credit history.
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there should be a fence between your personal credit and your business and they should not be effect by each other!!!
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