1.Not setting up your business in the correct Business Structure. Many individual business owners don’t think they need to set up their company as a legal business entity, since it's only them working. They have no employees and no co-workers, so they combine their business accounts with their personal accounts. By keeping your business activity separate from your personal activity, you are presenting to the tax collectors a clear picture that you are acting as a â€business†and not a â€hobbyâ€. This will help prevent proper business expenses from being â€disallowedâ€. Remember, when banks lend to individual â€sole proprietors†it’s 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 have 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 â€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 â€411†directory. When you apply for a loan or line of credit, the lender will call â€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. The address listed on â€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 the 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. Find out more about setting up your business structure and learn the secrets of presenting your company as â€well established†so you can get lines of credit and vendor credit cards without risking your personal FICO scores. For more information, click here to access the website for â€Basics of Business Credit†written by Susan Carter. Thank you.
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