Wednesday, March 10, 2010

Continued from previous posting:

In a less serious scenario, your company has encountered some difficulties due to the current economic environment and now "recovering" recession. You would like to negotiate better terms on your loan or with your suppliers. If the company is the sole guarantor and the company is struggling, assuming you have a decent plan to weather the storm, your lender is highly likely to negotiate with you. However, if you are a guarantor and have sizable assets, why should the lender negotiate when they can pursue your assets and be done with it? (Of course, having a strong relationship with your lender ALWAYS helps, as I repeatedly state over and over, like a broken record. Or shall I say "CD?".)

On the opposite side, many business owners complain about how all the credit they have for the business drags their personal credit scores down. By separating and building the business credit profile, the business owner can get business credit cards, equipment loans, etc. in the business' name and tax identification number. Thus, business loans are not associated with the owner's social security number and thus, do not impact his or her personal credit. Again, no personal guarantees.

Okay, enough of the what if scenarios. You get the gist behind the reason for having a strong business credit profile.

Just for emphasis one more time, here's what Wells Fargo Bank (now the owner of Wachovia Bank for those of us in the southeast) has said regarding separating business and personal credit and financing:
"The longer you delay establishing business credit, the longer you delay taking advantage of business loans."

I'll continue later with the "how" of building your business credit.


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