Most small businesses start out with a great idea, but soon learn that money is very hard to come by. When you first start out in business, it is easy to be all “me” and “myself” – focusing on your business and making all of the important decisions on your own. As your business grows and becomes successful, you realize that there are other factors affecting your business such as financing, sales, marketing, etc. With all these things involved, your time, money, and energy are better spent elsewhere. In other words, is business credit and personal credit the same?
To answer this question, you first need to understand both personal credit and business credit. In general, both are similar in the eyes of the credit reporting bureaus. A business is defined by a combination of assets, liabilities, revenue, and personal capital including equipment, inventory, and furniture and supplies. Personal credit is the amount of money that you have in your bank account, savings accounts, or credit cards, and is an important part of gaining business success.
The similarities between business credit and personal credit are in how assets and liabilities are handled. Both must be documented, tracked, and shared for the business to be successful. However, the differences between the two are that a business credit report is usually more detailed than a personal credit report. This means that business credit and personal credit are not always the same. Business credit is used to obtain loans and advances from financial institutions and helps to build business strength. Personal credit is often used just to make payments on accounts such as credit cards and utilities.
When you compare business credit and personal credit, there are some differences to consider. One of the differences is the level of detail that is given about assets and liabilities on the business credit report. This information is also less detailed on the personal credit report. The lack of information on personal credit allows people to manipulate the system and make purchases without being caught.
There are many ways that business credit and personal credit can affect each other. When people make purchases with their business credit card, they are actually spending money that is saved for their business. In the same way, if they make purchases with their personal credit card, they are really only spending money that is held in an account for their own use. Both of these accounts are reported to the credit bureaus and have their own unique credit report that is used for loan approval. Both business credit and personal credit are important when applying for a loan from a bank or other financial institution. Banks look at business credit history and personal credit history to determine whether or not they will approve you for a loan.
Because both business credit reports are made by different bureaus, it is possible that the details on one report could be slightly different than the other. Because of this, you may be able to see differences in what is on one of the reports. For example, if your business credit report has a discrepancy, the differences will show up as differences in the corresponding numbers on the other report.
When people think about is business credit and personal credit . . . . . . the same, they usually only consider business credit. However, that is not the only reason why it is important to maintain good credit. There are a number of reasons that a person should have a good business credit report. First of all, businesses usually require a lot of collateral such as real estate to secure loans. If the business defaults on the loan, it can lose its real estate and the business can go under. People who do not have collateral to offer can find themselves working very hard to start up a business and sometimes get very close to bankruptcy before it is successful.
Having business credit and personal credit is not the same thing as having a good or bad credit. What one is said to have is just as much credit as the other? The person who has the better credit is probably the person who is more aware of how to manage it. This means, even if they have poor business credit, they have learned how to improve it and they know how to keep from defaulting on a loan. Therefore, business credit is not the same as personal credit.