ABOUT FINANCING
A Guide to Personal and Business Financing


Business Financing
 

Starting up a business can be a tremendous strain on your personal finances. It can take six months or more before your new venture is profitable and can 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 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. A business' credit is built upon the owner's personal credit.

Because you have not established a business credit history, lenders and suppliers will use your personal credit history to determine your terms of credit.


Your credit report determines 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 have corrected. To get a copy of your personal credit report, refer to one of the three major credit bureaus.
 

In addition, it is very important for business owners and entrepreneurs to make sure their business credit report is accurate before they submit a credit application. To get copies of your business credit report, contact one of the business credit reporting agencies including D&B.


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Personal Financing


Credit is using tomorrow’s money to pay for something you get today. Because our society is becoming more and more credit-based, it is important that you understand how to use credit properly so that you will always have access to the most affordable terms of financing for all of the things that you may need to pay for over time.


On the other hand, some of you may never want to use credit again! However, chances are you’ll probably need some type of loan in the future. If so, then it will be important to make sure that you are educated about the wise use of credit so that you will be able to make the wisest choices, such as:


• Do you really need credit?

• If so, what kind of credit do you need?

• Who will you get credit from?

• Will you be able to pay for it?

• How much is too much?

• Will buying an item on credit make you happy if you don’t need it and can’t afford it?



WHAT IS CREDIT?

Credit is a promise to repay a debt for goods or services after you have received them. With credit, you receive the goods or services now but pay for them later. Between the time you receive the goods or services and the time you pay for them, you owe a debt. Your promise to pay the debt is usually stated in a contract which is enforceable in a court of law.


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