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Business Debt/EIN and business credit

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Expert: - 9/2/2008


Question
My husband recently obtained an EIN number for his business. Although now that we have things somewhat together I am a little confused. How do we start our business credit? And how do you keep your business credit seperate from your personal credit? Is this even possible?

Answer
Valerie,
Most Entrepreneurs or new small business owners don’t realize that their personal credit is crucial to their ability to successfully run a business.  When you first start a business your personal credit is what is used to determine the types of credit or if any credit will be extended to you or your business.  Your personal credit will also affect the rates at which credit is extended to your business.  Once your business is established, you can phase your personal credit out of the picture.

Since you are just starting your business, it doesn’t have any credit built up, which is why your personal credit is used until you can build up credit for your business.  

Some businesses are not considered separate from the owner so the credit is shared, those are sole proprietorships, general partnerships and limited partnerships.  Even though you have a taxpayer ID number for your business, your personal credit and social security number are still used to determine your business creditworthiness.  

Your best strategy is to talk to a few banks if you need a business loan and then decide where to apply based on many different factors including the interest rates offered, how long it will take to pay it back and any additional fees or penalties.  Before you approach a bank for a loan, make sure you have your business plan, your marketing plan and your credit policy all together. Small business owners or entrepreneurs that include a credit policy in their business plan have a higher success rate at getting approved for a loan.

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Michelle Dunn

Expertise

As one of the Top 5 Women in Collections, one of the Top 50 Collection Professionals, and winner of the Business Excellence award, I can answer any questions about debt, debt collection, improving business credit, creating a credit policy, enforcing a credit policy and collecting on past due accounts. I can also answer questions in regards to starting a debt collection agency since I have been a bill collector for over 24 years, started and ran my own collection agency for 8 years, and maintain my 12 year old Credit & Collections Association for members of the credit & debt collection industry. I am also the author of the popular and award winning book "Starting a Collection Agency, how to make money collecting money" now on it's 3rd edition. This book has won a the Writers Digest self published award as well as the New York Book Festival Award. I am a repeat contributor to the Wall Street Journal, and have been featured on NPR, CNN, as well as many other national radio and television programs. I have also been featured in national publications such as the Wall Street Journal, Forbes, Smart Money, MSNBC and much more. I have 17 published books to my name and am an accomplished speaker and consultant. I currently write 9 columns for newspapers, magazines and online portals worldwide.

Experience

I have over 24 years experience in debt collection, I started and ran my own collection agency for 8 years and I am the founder & owner of my Credit & Collections Association that I founded in 1998. www.credit-and-collections.com

Organizations
My Credit & Collections Association, I was also a member of the American Collectors Association and Plymouth Chamber of Commerce for 11 years. I am a member of many writing groups as well as my local Women Inspiring Women chapter. I am a member of Know More Media as an expert for their blog on business credit.

Publications
Business NH Magazine, Smart Money Magazine, MSNBC, CNN, Forbes.com, The Wall Street Journal, Home Business Magazine, Entrepreneur Magazine and website, many books, newspapers and television programs as well.

Education/Credentials
I have written 17 books in my collecting money series and one for Entrepreneur Press called the Ultimate Credit and Collections Handbook. My newest book is being published by John Wiley & Sons in May titled, The Guide to Getting Paid, how to weed out bad paying customers, collect on past due balances and avoid bad debt. This book is also being sold to many colleges as a text book.

Awards and Honors
My book Starting a Collection Agency, how to make money collecting money won an award from Writers Digest and the 2007 New York Book Festival in the "How to" category. I have won 2 awards from Dun & Bradstreet and Governor Jean Shaheen. I was nominated as one of the Top 5 Women in Collections twice as well as having been selected as one of Collection Advisor's Top 50 Collection Professionals by my peers.

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