Business Loan Basics

Business Loan vs. Personal Loan

Starting up a business can be one heck of a strain on your personal finances. It can take six months or more before your new venture begins to show profit and start to provide financial support for you and your family. Before going into business it is always wise to get your finances in order.

Write a monthly household budget that accounts for your income and your household expenses. Be as conservative as possible, because it is vital to your success that you have the resources to maintain your household expenses while your business is growing. Any strain on your personal budget will put the financial success of your business at a huge risk.

It is also a good idea to check your personal credit situation. Too often, entrepreneurs think that their business credit and personal credit are separate. Wrong assumption. Business credit is built upon the owner's personal credit. Because you have not established a business credit history, lenders and suppliers have to use your personal credit history to determine your terms of credit.

Your credit report, which is issued by a credit bureau, will determine how you will be perceived by potential lenders and suppliers. You should know what appears on your credit report because you may find errors that you will want to attempt to correct. You can get a copy of your personal credit report from one of the three major credit bureaus: Equifax, Experian, or Trans Union.