Smart Credit Decisions for Entrepreneurs
(Dallas, TX-National-Credit-Solutions) Without inventive young entrepreneurs, we would have no iPhone, no Facebook, no Starbucks, and no Disneyland. Thankfully, bright young thinkers still continue to take risks and dream big, but many of the most creative entrepreneurs still have trouble funding their startups. Here is a look at how entrepreneurs can make smarter credit decisions that will help them transform their ideas into reality:
1) Open a business credit card
Many entrepreneurs do not have a long credit history, which can be problematic when applying for small business loans. However, it is crucial to start building good credit as soon as possible to further your business. Once you have enough personal credit history to open a business credit card, create a separate account for your business so that you can start funding it with credit.
2) Don’t mix business with your personal life
While there are a few success stories where entrepreneurs have used their personal credit cards to build their business, this often causes more problems than not. Separating your personal finances from your business finances can save you a great deal of stress and endless headaches.
3) Create a cash reserve
It is a good idea to build a cash reserve in case of emergencies. Entrepreneurs often hit snags in their plans, and many have to fail a couple of times before they succeed. Don’t let this deter you from pursuing your ideas, though, just consider setting aside a certain amount of cash each month in case you run into a rough spot. This cash can help bail you out of debt that could (if left unpaid) wreck your credit score.
4) Be aware of your debt-to-income ratio
While ambition is one of the most admirable qualities of entrepreneurs, it can also lead them into tumultuous financial situations. Instead of being overly ambitious and optimistic about your new business, play it a little safer so as not to max out your credit cards and become burdened with debt. Keep your debt-to-income ratio low to avoid sinking your business.
Entrepreneurs need to maintain a good financial record for various reasons: to appeal to potential partners, to obtain a loan for business expenses, to start another business, and to attract investors. It’s no secret that entrepreneurship requires risk, but it also requires attentive financial maintenance and smart credit decisions.