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  • Does A Business Loan Affect Personal Credit? Here’s The Truth

    Does A Business Loan Affect Personal Credit? Here’s The Truth

    Personal credit can influence business loans. Some financing companies demand credit scores as an eligibility marker. However, is this the case for personal loans? Does a business loan affect a person’s credit score and limit their ability to get a loan? The answer to this is two-sided. While it is possible, some factors may make it impossible. But first taking into consideration the creditor’s stance is crucial. So how exactly does it work?

    Business Loans May Affect Personal Credit

    In an instance where a personal guarantee is required, personal credit will play a part. When seeking funding in the US, a personal guarantee is important. This happens when there is no collateral at stake, especially for Small Business Administration.

    Such requirements call on the business owner to show their credit score. Once the lenders are satisfied, the business loan is approved. For business owners with low credit scores, they may be unable to secure a loan.

    Using Personal Credit To Settle Business Debt

    This happens when business owners turn to alternative means of settling debts. They may choose to use personal credit cards. Consequently, some financial institutions would want to see their credit score. If they have amassed critical debt, then their loans may be declined. Additionally, this goes to show that impressive personal credit has its benefits to business owners. While business loans can affect personal credit by the debts accrued.

    Business Loans—Zero Effect On Personal Credit

    There are situations where business loans do not affect personal credit. See instances below.

    When No Personal Guarantee Needed

    On the other hand, some business loans may never interfere with personal credit. To access business loans, one is asked to provide certain details. For loans requiring an Employer Identification Number, a personal guarantee isn’t needed. This is not the case when a Social Security Number needs to be submitted. This would require a personal guarantee. In essence, it ultimately needs a personal credit score.

    Using Invoice As Collateral

    Another scenario where a personal guarantee isn’t a big deal is invoice factoring. All the financing firm needs is unpaid invoices. This would serve as a collateral for business loans.

    Being a Big Firm

    For establishments such as limited liability companies, or S Corporations they need not worry. These firms protect the owners from losing assets when they hit rock bottom. This is where business loans have zero impact on personal credit scores. But for a one-man business, there is no such shield. So chances are that business loans are influenced by personal credit.

    Can Business Loans Cater To Personal Matters?

    Personal loans are supposed to attend to personal debts. But it can also help in small business funding. On the other hand, business loans should not be used for personal debts. While it can happen, such a move attracts different penalties.

    In an instance where an individual is caught, one of the severe punishments is termed “piercing a veil.” This means that a business owner has failed to separate business and personal loans. Such persons are at risk of losing personal assets.

    Final Note

    Be direct with the type of loan required. While business loans can handle personal demands, be sure of the business financing. In a case where it can affect personal credit, resist the urge to take it.

    #Clique, what are your thoughts?

  • Recession Survival: 5 Things You Should Never Do

    When the GDP declines for two quarters back to back, recession is bound to occur. It is also characterized by an intense trickle in economic activity. For economies with recession, there is reduced demand from consumers. Such an economy is also faced with a high employment rate. During these times, people with investments are usually cautious. They hope to secure their investments through various means. It could mean retracting an investment scheme. But there are also key elements non-investors should know.

    Five Things On The Never-Do List During A Recession

    During a recession, one must be conscious of their financial decisions. One wrong move might crumble everything. Bad choices during a recession would be the following:

    Entering Into A New Debt

    It is never advisable to be in debt or take too many loans even when the economy is buoyant. But during such periods one can work and meet up with a repayment loan. During recession things are different. Many people lose their jobs. Such periods serve as a disadvantage as there is no means to repay the debt.
    If that student or car loan isn’t extremely important, do not take it. In a recession, debt acquisition is a setup for a financial crisis. Consequently, this affects finances and the individual’s mental health.

    Do Not Lose Your Job During A Recession

    Businesses lay off workers during a recession. But some people get lucky to retain their position with slashed pay. At this point, every task from an employer must not be taken with levity. Focus on keeping that job via performance and punctuality. Apart from keeping a job, recession isn’t a good time to leave a job. For someone nearing retirement, they could experience financial decline.

    So rather than check into retirement early, wait a bit. As explained earlier, leaving a job for any reason doesn’t cut it. For younger workers following a passion during a recession is not wise. If the workplace isn’t entirely against self-development, stay put. Passions can be pursued when funds are secured.

    Teaming Up to Co-Sign

    Just like accruing debt, this is also a financial flaw. In a stable economy, acting as a guarantor or co-signer can incur debt. In case the borrower falls short in payment, the co-signer is liable. Imagine taking such a risk during a recession. A co-signer can run into financial issues. Depending on the loan requirements, such a person could lose their job.

    Never An Adjustable Rate Mortgage

    For mortgage loans, people are offered — an adjustable rate mortgage or fixed rate mortgage. It is best to side with the latter. During recessions interest rates plunge. It only becomes higher as the economy picks up. People on ARM do not get a fair deal as the rates fluctuate. But for a person on a fixed-rate mortgage, the interest rates remain the same.

    Lock Up Risky Investments During Recession

    In very few instances risky business moves yield overwhelming success. Still, never consider gambling during a recession. A business owner must be extra careful. Their decisions may make or mar their business. So this is not a time to invest unwisely due to populations.

    While borrowing may be inviting during a recession, avoid it at all costs. Since demands are low at this point, it could affect the business revenue. Hence, making it difficult to pay back that seemingly inviting loan when the economy picks up.

    Final Note

    Recession can be beneficial as it teaches one how to strategize. Such strategies include developing a screw business sense and setting achievable budgets.

    #Clique, what are your thoughts?

  • Business Loans VS Personal Loans: Differences You Need To Know

    Business Loans VS Personal Loans: Differences You Need To Know

    Both are loans, but business loans and personal loans are entirely different. No one is more important than the other. But it is crucial to know that they have peculiar features. As it takes different means to access any of them. While personal loans may be unsecured and are accessible to all, business loans are restricted. Plus there is also a lot at stake when processing business loans.

    What To Expect With A Business Loan

    Business loans have no other definition apart from it being funding for a business purpose. More people are involved in this type of loan. It could be a board of directors, a sole proprietor, and a guarantor. Whatever way, this type of loan requires different standards for a company to be eligible.

    A Huge Amount Often Required

    Since it is to cover the cost of a business, banks can offer millions. In the US, a company can get around $ 2 million in Small Business Administration (SBA) loans. It all depends on the maximum amount the bank can disburse.

    Payment Plan Is Extended

    Business loan debtors have the chance to pay after years of securing the loan. Some get up to a twenty-five-year repayment plan.

    Loans Don’t Come on Time

    Due to the amount in question, it could take weeks or months before a business loan is processed. It also depends on whether the business is eligible for it.

    It Takes A Lot To Be Eligible

    Qualification processes are based on the creditor’s policy. Most times businesses with low credit scores or zero loan history find it difficult to secure loans.

    What To Expect With A Personal Loan

    The opposite of business loans is personal loans. This is usually for self-needs. It can take care of personal needs and small business funding. Such loans aren’t restricted to just personal purposes, unlike business loans.

    Speedy Funding

    There is usually no need to wait for months or weeks. A personal loan can be credited almost immediately. A person can receive funds even from the comfort of their home.

    Instant Approval

    Since it takes less data and requirements, personal loans often scale through the approval process. However, some lenders go through a rigid registration process. But in the end, the loan is mostly approved. In a case where a person’s score credit is low, their loan might be affected. It could be a reduced amount compared to what was requested.

    Tough on Interest Rate

    Credit scores can be affected if the due date for repayment isn’t adhered to. Most personal loans come with crippling interest rates. But with constant application and repayment, the interest rates lessens.

    Final Note

    Irrespective of the purpose of the loan, repayment is very important. This would not only boost the borrower’s score but influence their chances for a higher loan. However, do not forget that it takes different procedures to secure a business and personal loan.

    #Clique, what are your thoughts?

  • Sharing Expenses With Your Partner

    Sharing Expenses With Your Partner

    Relationship is beautiful with all the lovey-dovey stuff and PDA here and there. It is also a way in which two people are connected with love. However, leaving out infidelity, one factor — Finances/Expenses, tends to cause serious problems among couples.

    From the beginning of the relationship, it is typical that the man should pay for the first date in most cultures. But what happens after the first, second, third, tenth etc. People have different perspectives to life, and that is why finances/ expenses can be a difficult topic for couples, mostly the ones about to move in together.

    Hence, the importance of straightening out finance-related issues in a relationship, especially how to share or split expenses. Having such discussions will help you understand your partner’s financial behavior and concept, so you guys can get on the same page.

    According to Mind Money Balance, there are ways to split expenses with your partner, and they include:

    The 50/50 Method

    Going the equal halves route is a welcome idea for some couples. This method involves partners calculating the total expenses they incur monthly or over a period of time, and split the bills equally. This way, there are no arguments about anybody owing the other person. However, this method works best for couples that are within the same pay grade.

    Income-Driven Method

    This method is the opposite of the aforestated one. In this method, the couples split their expenses based on what each person earns. If one party’s income is higher than the other, they may have to agree on an unequal splitting percentage like 60% to 40% or 54% to 46%.

    The key thing about splitting expenses between couples is communication. It is essential to talk about vital topics like this because it helps partners to get on the same page. Financial compatibility is a thing; so, it is better to settle such issues in the relationship early enough.

  • When Is The Best Time To Start Saving For Retirement?

    When Is The Best Time To Start Saving For Retirement?

    Planning ahead is important, especially when it comes to one’s future. It can be sad to work throughout your youthful age with nothing to show for it when it’s time to rest due to old age.

    There are stories of retired folks that worked hard all their lives, but made a mistake of not putting things in place (saving) for retirement. It’s either they mismanaged their funds, or completely failed to envisage the future.

    To avoid such situations, the best step to take is to plan your retirement properly and early enough. But the question remains, when is the right time to start saving for retirement?

    According to Investopedia, Marguerita Cheng, CFP:registered:, CEO of Blue Ocean Global Wealth, stated that although retirement may seem far off when you are young, but it’s vital to start saving/planning for it in your 20s. Cheng further opined that it’s best to think of retirement savings as wealth accumulation.

    One thing about retirement is that it gets more difficult with time if you do not plan for it early enough. Even though you do not earn much yet, it’s important to always have retirement at the back of your mind. Capitalize on the fact that you are young, and make the most of it.

    Here are some key points to note:

    1. Waiting to start saving a lot may be disastrous, so, start saving little early.
    2. Consult with an investment/ financial advisor if you don’t know how to start.
    3. Know your goals, and set realistic ones.
    4. Start early!

    Failing to plan, is planning to fail, and that is something you do not want at after your retirement. Take your future seriously, and start saving for it!