Borrowing Money and Managing Credit

Although this discussion mainly focuses on credit as it affects your personal finances, because as a business owner your personal and business financial situations are closely intertwined, your personal and business credit standing and management are also closely related. If your business gets into trouble by incurring too much debt, this will likely affect the business's profitability, which will in turn likely affect your ability to qualify for personal credit.

The flip side of this can also be true: if you are over-burdened with personal debt, your business creditors (who can be expected to ask for your personal guarantee on loans made to your small business) may be less willing to extent credit to your business if they think your personal guarantee to be of little or no value.

So far, we have talked about consumer credit in essentially negative terms: how being overburdened with debt can adversely affect you and your business. But, personal credit, if used wisely, has its advantages. We suggest that you consult the following topics, which speak to both the advantages that can be gained and the pitfalls to be avoided with respect to consumer credit.

• What is consumer credit?
• Uses and cost of consumer credit
• Applying for credit
• Maintaining a good credit rating
• Cosigning a loan
• What to do if you're drowning in debt.
• Bankruptcy: the last resort

For information on issues relating to your business's credit management, see our discussion of getting financing for your business. For information on extending credit to your customers, see our discussion of credit and collections.