Cash flow is the lifeblood of any business, whatever the size. If your organization doesn’t have sufficient operational cash flow (cash generated on an everyday or weekly basis from daily operation of one’s business), you then need to access cash from attempting to sell assets (cash flow from investing) or from financing. Get into financing either you whilst the business owner or your business needs credit. Should you want to keep your own personal finances COMPLETELY split from your own business finances, you will have to know the best way to build business credit that is completely separate from you. To put it differently, you will want to obtain supplier terms, bank loans, and equipment financing with only the company’s performance or assets as an assurance of performance, not YOUR assets or signature as a guarantee.
No personal guarantees. Imagine this scenario: Your business is performing extremely well but two of the largest customers file for bankruptcy and you also did not view it coming. This will wipe out your business income overnight, especially when you had not been managing your receivables tightly and individual’s customers owe you a considerable sum of money. But regardless, you’ll need time to build relationships and replace those customers. Your business might encounter financial distress in the interim as a result.
If the company subsequently cannot make its payments on loans or to suppliers, if you have personal guarantees in place, those guarantees could be contacted. So when it comes to a deep failing company, whether temporarily or permanently, you’d lose the income the business paid you as an income PLUS you’d need certainly to make loan repayments from your personal assets. It just went from bad to worse! Let’s say all you could have been tangled up in the business? Well, if the corporation has to seek bankruptcy relief, you may have to also. If you had stand-alone business credit, your personal finances would not be an issue.