![]() The lower the score, the harder it is to secure financing, and the more interest is charged.Ī further adverse effect of the business owner using their personal credit for business debts is that the more personal credit is used to guarantee a business, the higher the business owner’s debt-to-income ratio. When an owner personally guarantees business-related financing, the lender will require a personal credit check.Įvery time an inquiry appears on an individual’s credit history, his or her personal credit score takes are lowered. There are several severe and,- adverse effects on business owners who does this. Common examples include paying for business expenses with personal credit cards and obtaining personal loans to finance business expenses. A recent study showed that 87% of ALL businesses mix personal and business credit. One of the most common mistakes entrepreneurs make is using personal credit to finance their businesses. ![]() This keeps their personal finances safe and secure. No PG means the business takes on the risk, not the business owner. With a personal guarantee, in the case of a default, the creditor can pursue the personal home, bank accounts, investments, and file judgments against assets of the business owners in person. A personal guarantee is an agreement that makes the business owner in person liable for the business’s debts and/ or obligations. Most business owners currently use credit with a Personal Guarantee (PG). The business is approved for credit, not the owner, meaning that in many cases there are no personal guarantee required. The business owner’s personal credit profile is not reviewed at all, because it’s their business profile that is used for approvals. As a result, most never realize that it is possible to obtain considerable credit for their businesses with no personal guarantee or personal credit inquiry – hence, with no personal risk.īusiness Credit bases approvals on the credit profile and score of the business, not its owner. Most business owners quickly get accustomed to using personal credit as a personal guarantee for their businesses. That means that the other 90% of business owners know nothing about business credit, which then leaves more money available for the smaller percentage who do, – including, you that has this piece of information. This is actually great news for you, because now that you are reading this book, you’ll get to know about it, and will thoroughly understand, the power of business credit. On the other hand, most Americans and even business owners have still never heard of a DUNS number, Paydex score, Intelliscore, or even Dun and Bradstreet.Į reported that fewer than 10% of business owners have any knowledge whatsoever of business credit. In the United States, these institutions have become household names. Strongly believe you have heard of Equifax, Experian, Trans Union, and the FICO score before. The measure of a man is what he does with power.
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