How to Ruin Your Personal Credit with One Signature – or Two or Three….

You know credit is an important part of any business, but it is critically important for the small business owner. It seems like almost every day I talk to a business owner who “had great credit before the business started.” Sound familiar?

There are two common mistakes I see business owners make that will quickly deteriorate your personal credit rating.

1 – No separate business entity

Most business owners have taken the steps to create a legal entity (S-corp, C-corp, LLC) and establish a federal tax ID number (not EIN number). However, most do not maximize the advantage of this separate entity when they seek business financing.

This happens either because you do not believe you can or do not know how to establish credit in the name of your company. While there is a lot to know about business credit agencies, vendor reporting, business lending banks and the rest, it is fairly simple to create a great credit score one you understand how the system works.

Without a separate business entity, however, you have no option but to personally obligate yourself for the debts of your business by signing for every loan or credit personally. Think of the “business credit card” you have. While it may have the company name on it, you are personally obligated for the charges you make because you used your social security number and signed personally when you applied.

If you apply with your company name and use the company tax ID number where the social security number goes, you have established credit that is in the name of your company only. There are only 40 business credit card companies (out of 500) that will offer their credit card with no social security number requirement.

2 – Signing personally

This happens as a result of point #1. Without a separate entity and strong credit to assign lending risk to, most business owners have no choice but to sign personally for most or all of the credit they need to grow their business.

This causes 1) Sleepless nights with growing debt you are personally responsible for 2) Quickly exhausting your personal credit limits which will negatively impact your personal credit score 3) Personal responsibility for the debts of your business.

When you reflect on your current credit strategy, there is almost nothing positive about personally signing for business credit. At the root of this problem is the fact that most business owners are so busy working IN their business they allow very little time to work ON their business.

Because of this, we have created the Capital Access & Rate Enhancement Program™ which is a trademarked process that can help any business owner position their company to have access to credit that is in the name of their company only. It can also allow you to gradually shift the debts you now personally guaranteeing to the company.

Access to capital and strong business credit will either be a constant problem or a competitive business advantage; with our unique process, the choice is yours.

I’ll provide updates here as this program develops.