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 new business owners dont think they need to set up their company as a legal business entity because it's only them working. They dont think its a problem to combine their business accounts with their personal accounts. Regrettably, this mixing of money and expenses causes a huge problem for the new business owner. If they keep their business and personal activity separate, they present to the taxing authorities (Uncle Sam) an obvious picture that they are functioning 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 regularly check your personal credit reports to make sure there are no mistakes on them, but it is also important that you check your business credit report as well. When you are a new business and try to apply for business lines of credit, or trade credit (i.e. Home Depot card), vendors and financial institutions generally ask for a personal guarantee before extending business credit to your company. If you have not checked on your personal credit reports, and there are mistakes, you may lose your ability to get business credit because of possible negative data. This also holds true for business credit reports. Dun & Bradstreet is the most well known of the business credit agencies and if false, or negative information is reported to D&B, you will also be denied credit. Financial institutions are looking to lend money to a business that is being reported as a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with the credit agencies, and it is up to you to verify on a regular basis that all your financial activity is being reported accurately.
1. Not setting up your business in the correct Business Structure. Many new business owners dont think they need to set up their company as a legal business entity because it's only them working. They dont think its a problem to combine their business accounts with their personal accounts. Regrettably, this mixing of money and expenses causes a huge problem for the new business owner. If they keep their business and personal activity separate, they present to the taxing authorities (Uncle Sam) an obvious picture that they are functioning 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 regularly check your personal credit reports to make sure there are no mistakes on them, but it is also important that you check your business credit report as well. When you are a new business and try to apply for business lines of credit, or trade credit (i.e. Home Depot card), vendors and financial institutions generally ask for a personal guarantee before extending business credit to your company. If you have not checked on your personal credit reports, and there are mistakes, you may lose your ability to get business credit because of possible negative data. This also holds true for business credit reports. Dun & Bradstreet is the most well known of the business credit agencies and if false, or negative information is reported to D&B, you will also be denied credit. Financial institutions are looking to lend money to a business that is being reported as a good credit risk. It is critical that your personal and business creditworthiness are reported accurately with the credit agencies, and it is up to you to verify on a regular basis that all your financial activity is being reported accurately.
About the Author:
Find out more about how to structure your business correctly, and learn additional secrets to help you present your company to the business world as well established. Get the information you need to get lines of credit and vendor credit cards for your business without putting your personal credit at risk.
posted by Credit Counseling at
1:18 AM
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