Do Personal Finances Affect My Small Business?
- April 2, 2022
- Written by : Carl Eschenburg
Ahh, personal finances.
The endless cycle of making money, to save money, to spend money.
But how, if at all, does your personal spending and saving affect your business?
Those who want to successfully manage finances in a business must first know how to and practice managing their own personal finances.
And it is here that the flood gates of knowledge and education open.
Just as U.S. News says, “the amount of financial content available online is staggering. Along with articles and videos, there are countless podcasts devoted to helping you pay off debt, invest wisely, and retire comfortably.”
With more resources than you could possibly ever get to, it is important to know what to know. We put together a short list of ways that your personal finances could affect your small business.
- Personal debt shows lenders that you may not be prepared, willing, or able to repay owed debts in your business. Therefore, if you apply for business funding, you may be seen as too high of a risk and turned away.
- Your credit score highly affects your ability to be granted funding or other financial aid, and unfortunately even the smallest of payments can disrupt your score. When you apply for financing, lenders will assume that your current personal credit score is a direct reflection of your future business credit score.
- When you need help and support to continue your business, whether through new equipment purchases, new hires, or general growth, there are many groups such as the SBA that are more than willing to lend a helping hand. However, your personal debt and credit score will serve as a clear sign for investors, suppliers, partners and more will view your ability to take on a risk and grow.
- How you have your business set up matters. Are you an LLC? A Sole Proprietorship? A C-Corp? Or other? Each of these options change how you file your taxes. If you do not properly file both personal and business taxes correctly (which includes how you pay yourself from the business), the IRS could file tax liens against your business, or even force bankruptcy.
Have a better understanding of how personal finances affect your small business? We hope so!
We want to help allow you to spend your time and energy wisely when it comes to learning about the overlap of your finances. If you need more help or details, don’t hesitate to contact us.