It’s easy. It happens. You’re in a rush and you need to pay a bill for the business, so you whip out your personal credit card. It’s available, so what’s the big deal? 

The problem with using personal credit cards or credit information to get business loans and credit is that you entangle your personal credit with that of your business. That’s a much bigger problem than you might think.

Even if your business is you and no one else, here are 5 reasons why mixing your business with your personal financial information is dangerous.

1) It is easy to get over-extended in business. If you do not protect personal credit scores by getting any businesses expense funding in the business name, and tax ID your ratings may plummet. One of the biggest influences on credit ratings, besides lack of payment, is the debt to income ratio. If your business has a lot of working capital money outstanding, lots of accounts waiting for payment, you may have a serious cash crunch that will have a negative impact on your credit.

2) Paying your business expenses with personal credit cards and/or paying business taxes with your social security number instead of a Federal Tax ID number means that you “are” your business. If you have a bad stretch and can’t pay your bills, not only will you be unable to protect your credit rating, but your creditors may be able to attach your personal bank accounts, property or other assets to get their money.

3) If your business achieves a great deal of success, it is still dangerous to combine your personal and business identities. You could be a target of industrial espionage that ends up with losing personal private financial information and even identity theft.

4) You could destroy your ability to provide for your family. Sure, you may be providing well for your business by obtaining loans and credit for your business with your personal information. However, that could be a serious problem when you want to buy a new house, need a new car or just try to apply for a new credit card for family expenses. Your extended credit is already loaded up due to your business.

If you are late on a business loan or credit payment, you have destroyed your personal ability to get a loan or credit as well.

5) The biggest reason may well be one that keeps your business going during the tough times. Having credit built up in your business name will not only help you protect personal credit, it gives your business a persona. Good business credit will help you get loans when you need them.

There are times when it is impossible to keep personal and business credit separate. New or small businesses with fewer than 20 employees are often treated as personal financing situations by banks and lenders. However, it is a smart move to do everything in your power to separate them as much as possible.

Business Credit business credit, personal credit, small business