Top 3 Business Mistakes that Kill your Profit
Have you ever wished that you knew ahead of time how to avoid mistakes that will cost you money? Do you realize that when it comes to your business, these mistakes can cost you thousands of dollars? Well my goal is to help you. I can tell you how to avoid some of the most costly mistakes 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.
Remember, when banks lend to individual sole proprietors its considered a personal loan and is reported to the personal credit bureaus like Equifax. By setting up your business as a corporation, partnership or LLC, the lending institutions will report your business creditworthiness to the business credit bureaus, and your FICO scores are not affected - if you used your Employer ID number (EIN) on the account with the lender. You will also look more professional in the eyes of a bank or other financial institution if you are set up as a business entity.
2. Not presenting your business as an established business. This means your business has its own address and own phone number. That doesnt mean you cant work out of your home, it means that to the business credit world you must show your business as having its own address. Your business absolutely must be listed in the national 411 directory. Small business owners sometimes use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender calls 411 to verify a business and expects to find a specific address and matching business phone number. They dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must match the address listed with the State in which the business is registered because the financial institutions will also go onto the States website and verify the business information.
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.
Remember, when banks lend to individual sole proprietors its considered a personal loan and is reported to the personal credit bureaus like Equifax. By setting up your business as a corporation, partnership or LLC, the lending institutions will report your business creditworthiness to the business credit bureaus, and your FICO scores are not affected - if you used your Employer ID number (EIN) on the account with the lender. You will also look more professional in the eyes of a bank or other financial institution if you are set up as a business entity.
2. Not presenting your business as an established business. This means your business has its own address and own phone number. That doesnt mean you cant work out of your home, it means that to the business credit world you must show your business as having its own address. Your business absolutely must be listed in the national 411 directory. Small business owners sometimes use their cell phone number as their business phone number. Unfortunately, a cell phone number is not acceptable for most financial institutions. A lender calls 411 to verify a business and expects to find a specific address and matching business phone number. They dont want to see P.O. boxes or UPS addresses. If you run your business out of your home, it must be a separate phone line that appears in the 411 directory as belonging to the address listed in the 411 directory. It must match the address listed with the State in which the business is registered because the financial institutions will also go onto the States website and verify the business information.
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:
Learn more about setting up business structure correctly, and learn more tips to present your company to the world as being well established. Get the knowledge 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 Debt Consolidation Loan at
12:47 PM
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