Top 3 Business Mistakes that Kill your Profit
You've probably wished many times that you knew ahead of time how to avoid the mistakes that are going to cost you money. When it comes to your business, these can be so costly that you may lose thousands of dollars if you make them. My goal is to help you avoid some of the important ones so that you stay on the right track to making money, instead of losing money.
1. Not setting up your business in the correct Business Structure. Many individuals dont think they need to set up their company as a legal business entity because it's only them working. They dont consider it an issue when they combine their business accounts with their personal accounts. Unfortunately, this combining of funds and expenses can cause a huge crisis for the business owner. However, by keeping their business activity separate from their personal activity, they are presenting to the tax collectors a clear picture that they are acting as a business and not as a hobby.
Always keep in mind that a loan to an individual is considered a personal loan - and its reported to the personal credit bureaus. However, a loan to a corporation, partnership or LLC, is reported to the business credit bureaus " if they have used their EIN on their application. Personal FICO scores are, therefore, not affected (if there is no personal guarantee on the loan). A business will look more professional in the eyes of a lender or bank if they are set up as a business entity. This is critical in the business world.
2. Not presenting your business as established and in working order. This means that your business has its own address and phone number. It is very important that your business is listed in the national 411 directory. Many people run their business using a cell phone number as their business phone number. However, a cell phone number is not acceptable for most financial institutions. When you apply for a loan or line of credit, the lender will call 411 to verify that you are an established business with a specific address and phone number. Lenders also do not want to see P.O. boxes or UPS addresses. They want a real, physical address. The address listed in the 411 directory must match the address listed with the State because the financial institutions will go online and verify your business information with the State. If they do not find a match, you may be denied business credit.
3. Not checking your credit report. You know how important it is to check your personal credit reports regularly, but its also important that you check your business credit. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get that business credit if negative data appears on your personal credit report. This is true for business as well. You may be denied credit if false or inaccurate information is reported to D&B (the most well known business credit agency). Lenders look for businesses that are a good credit risk and dont want to work with businesses with poor creditworthiness. It is most important that personal and business credit is reported accurately with all the credit agencies.
1. Not setting up your business in the correct Business Structure. Many individuals dont think they need to set up their company as a legal business entity because it's only them working. They dont consider it an issue when they combine their business accounts with their personal accounts. Unfortunately, this combining of funds and expenses can cause a huge crisis for the business owner. However, by keeping their business activity separate from their personal activity, they are presenting to the tax collectors a clear picture that they are acting as a business and not as a hobby.
Always keep in mind that a loan to an individual is considered a personal loan - and its reported to the personal credit bureaus. However, a loan to a corporation, partnership or LLC, is reported to the business credit bureaus " if they have used their EIN on their application. Personal FICO scores are, therefore, not affected (if there is no personal guarantee on the loan). A business will look more professional in the eyes of a lender or bank if they are set up as a business entity. This is critical in the business world.
2. Not presenting your business as established and in working order. This means that your business has its own address and phone number. It is very important that your business is listed in the national 411 directory. Many people run their business using a cell phone number as their business phone number. However, a cell phone number is not acceptable for most financial institutions. When you apply for a loan or line of credit, the lender will call 411 to verify that you are an established business with a specific address and phone number. Lenders also do not want to see P.O. boxes or UPS addresses. They want a real, physical address. The address listed in the 411 directory must match the address listed with the State because the financial institutions will go online and verify your business information with the State. If they do not find a match, you may be denied business credit.
3. Not checking your credit report. You know how important it is to check your personal credit reports regularly, but its also important that you check your business credit. Have you noticed that when you are a new business and you try to apply for business credit, financial institutions generally ask for a personal guarantee before extending business credit to your company? You may lose your ability to get that business credit if negative data appears on your personal credit report. This is true for business as well. You may be denied credit if false or inaccurate information is reported to D&B (the most well known business credit agency). Lenders look for businesses that are a good credit risk and dont want to work with businesses with poor creditworthiness. It is most important that personal and business credit is reported accurately with all the credit agencies.
About the Author:
Find out more about setting up your business structure correctly, and learn more tips to present your company to the world as being well established. Get the information you need so you can obtain lines of credit and vendor credit cards for your business without putting your personal credit at risk.
posted by Credit Counseling at
1:55 PM
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