If you run a small business you will at some point need to borrow money in order to pay for your business expenses. But what are the differences between business loans and personal loans? If you borrow money for your business is it automatically a business loan? Not necessarily.
New businesses like yours most likely don't have a high credit score, if they have one at all. These credit scores are run on a completely different scale from personal scores and they are based on the credit history of your enterprise only. It's important to note that if you get a personal loan to spend on your business this will not effect your enterprise's score at all. You must borrow money from your business accounts and pay back this money from your accounts. So, if you don't have any sort of credit built up for your business what do you do if you need to borrow money?
Most new business owners will have to get personal loans instead. This means you will have to put up your own assets and your own personal credit worthiness on the line to borrow money.
This is the primary difference between a personal loan and a business one. If you have a corporate business structure (LLC or Scorp for example) any money your business barrows is completely separate from your own funds. Your company could go bankrupt and you wouldn't have to pay back this loan personally, your business backs the loan with its own assets and its own credit score.
It may be a good idea to borrow small loans from your business accounts, for things such as supplies to slowly build your business credit, while borrowing using your personal credit worthiness in the meantime.
New businesses like yours most likely don't have a high credit score, if they have one at all. These credit scores are run on a completely different scale from personal scores and they are based on the credit history of your enterprise only. It's important to note that if you get a personal loan to spend on your business this will not effect your enterprise's score at all. You must borrow money from your business accounts and pay back this money from your accounts. So, if you don't have any sort of credit built up for your business what do you do if you need to borrow money?
Most new business owners will have to get personal loans instead. This means you will have to put up your own assets and your own personal credit worthiness on the line to borrow money.
This is the primary difference between a personal loan and a business one. If you have a corporate business structure (LLC or Scorp for example) any money your business barrows is completely separate from your own funds. Your company could go bankrupt and you wouldn't have to pay back this loan personally, your business backs the loan with its own assets and its own credit score.
It may be a good idea to borrow small loans from your business accounts, for things such as supplies to slowly build your business credit, while borrowing using your personal credit worthiness in the meantime.
1 comments:
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