It’s very important for small business owners to stay on top of their business’ income and expenses. However, many entrepreneurs tend to blur the line between their personal and business finances. It’s important to remember that your business is an independent entity, no matter how small-scale it is. There are many reasons why you need to separate personal and business finances. Applying for Boston business loans can help separate your finances, but in addition to this, here are four other reasons why you should consider doing so.
1. Credit Rating
Your credit rating determines your ability to obtain working capital for your business. The higher your business credit, the easier it is for your business to secure larger loans. If there’s no clear distinction between your personal and business finances, it’s harder for you to provide your business income to financial institutions. Most lenders also assess personal credit to determine loan eligibility because borrowers are usually asked to partially guarantee the loan. Similarly, a strong credit score means more borrowing power.
2. Business Reputation
How you manage your company’s finances speaks volumes about your business reputation. Lenders, business partners, and vendors want to know that you’re serious about your business. By having two separate accounts, you can establish your business’ identity, and therefore, improve your reputation. It also helps to apply for credit cards, checks, or a business line of credit since it helps to draw a clear line between your finances.
3. Cut Costs and Save Time
Business owners want to run their companies more efficiently. By separating your personal and business finances, you’ll be able to reduce billable hours, therefore saving a large amount of money. You have the option to hire an accountant or use a business accounting software to help you sort through your finances. In addition, proper financial management helps potential investors and lenders get a clear picture of your finances.
One of the biggest reasons to separate personal and business finances is tax benefits. When both finances are separated, you can take advantage of tax reductions, as well as writing off business expenses. It’s very important to maintain a separate and accurate record of your personal and business expenses when running your company. By doing this, you can save yourself from stressing over taxes. Additionally, a detailed list of your expenditures can help in the event you are audited by the IRS. If both your finances are intertwined, the IRS would most likely audit your business and personal records.
Boston Business Loans – Small Business Loans for You
By applying for Boston business loans – especially a business line of credit, you’ll be able to automatically separate business and personal finances. The experts at SMB Compass can help you as well as offer you a variety of loan programs for small businesses in the United States.