Women are savvy and creative in many areas including the business world. Many start with an idea that either by shear luck and/or lots of sweat and tears turns into a successful business venture. In addition to fantastic resources available to women entering business, educating them on how to structure a business plan, a business budget and resources that will open doors for them to greater opportunities, here is something usually not covered.

I see women starting their business on a personal credit card due to the fact that 1) venture capital is hard to get for anyone now days, and 2) when facing the financial sharks , you must already be successful before you have any credibility and credit. It’s a catch 22, “How can you have credit if no one will give you credit ?” And we all know it DOES take money to make money, I don’t care how creative you are, and how much sweat equity you have invested. You may ask: “What’s the difference between personal and business credit ?”

After start up, you will want to establish a line of credit with the bank that knows you. Now I will show you how this becomes a two sided sword that will cut you if not careful. It takes your personal credit history to establish your business credit. Starting out, you are the co-signer, the person responsible for the debt of the business. The business loans in your personal name and will be reported in your personal credit history.

However, your business credit history in your business name will not show up in your personal credit history. You could have excellent business history but it won’t help you at all in your personal credit world.

With a new business, normally with a negative cash flow, there is an out of balance business debt to credit ratio. Because your name is on the business credit card accounts as co-signer / person responsible, and you have over 40% of debt compared to your credit limit, this raises the debt-to-credit ratio and lowers your personal credit score. Now because your personal credit score is lowered, you may have trouble financially supporting a new business.

One solution is to separate as much as possible the two different entities. Ask your banker to assist and advise you on the best way through his particular system to establish business credit. Ask also that the bank to report your business payments to the business credit bureaus, not the personal credit bureaus. Remember I told you there were nine other important credit bureaus out there beside the big three.

There are always options, Spectrum Resources offers education and resources in debt, credit and home ownership. Please call (863) 967-0660 email: SpectrumResources@tampabay.rr.com and please visit our sister blogs for more lessons:
http://MoneySavingTips.PolkVoice.com and http://SpectrumResources.wordpress.com
and http://FinancialEducationAndOptions.blogspot.com and for a 75 Day Credit Makeover visit: www.CreditJusticeServices.com/?ccc=1242