I would like to share a few tips regarding business financing, taxes and credit which I learned from my experiences and from other professionals. It can be basic information but very important for business owners.
100% Tax deductible for paid interest of business loan:
Don't forget to write off 100% paid interest of your business loan when you file taxes But you need to provide loan info to your tax preparer. However, you can not write off on any personal loans.
I've been very happy to provide payment history and funding transaction info for my clients. But they need to contact me and request it.
Your business loan info will Not be on your personal credit report:
Unlike your personal loan, your business loan info will not be on your personal credit. But If you get business loans, the lenders may have rights to file UCC(Uniform Commercial Code) in the borrower's state. So your good business loan payment history will be affected on your business credit, not on your personal credit
However if you default your business loans, the judgment may will be on your personal credit. In case you face the hardship and not be able to make payments, it is strongly advised to work with lenders for temporary repayment plans to avoid the judgment for more problems. Even if you paid off the judgment amount, the record may be on your personal and business credit report for a long time.
Another important thing is that many or some business credit cards' use will be reported on personal credit. When you have high balances with business credit cards, your personal credit will drop a lot. Your credit score may go up and down depending on your balances.
How to maintain good credit:
It is so obvious that you can get better loan programs when you have good personal credit. I see so many misconception on personal credit from my clients and customers. Here are some helpful information on how to maintain good credit.
<3 Elements to determine your credit score>
1. Payment History:
It's very important you make your payments on time for your credit cards, house mortgages, car lease or finance and other payments.
2. Amount Owed vs Credit Limit:
So many people have wrong idea on this part. If you have a balance more than 50% of your limit at any time when your credit is pulled, your credit score will start drop. It doesn't matter you pay in full every month. So you need to use less than 50% of your credit limit all the time. That's why you only use your credit cards for managing good credit, not for operating expenses.
In order to build and raise your credit limit in a short period of time, it's better you leave about 10% of your balance for a fee, instead pay in full amount when you make payments.
3. Length of Credit:
The longer the better. Don't get rid of old credit cards and keep it.
< 2 Kinds of Credit Pull>
-Hard credit pull: Full credit report, credit inquiries will be shown on your credit and may reduce 2-5 score.
-Soft credit pull: summary credit report, no credit inquiries, no affect on your credit score.
<3 Credit Bureaus>
There 3 different credit bureaus in USA. It is advised you to check your credit once a year and resolve any problems on your report as soon as possible.