Top Mistakes Small Business Owners make that damages their ability to expand.

I deal with business owners daily and am amazed at the common misconceptions business owners have. Most owners aren't aware of how their personal credit, business credit, and outstanding lines of credit dramatically effect their business. Since the credit markets are extremely tight, successful owners need to have an understanding of how to make themselves appear bankable to the underwriters and have access to the best funding possible.

Mistake #1. Not managing your business credit cards properly. In most cases, these credit cards report to an owners personal credit and 1 or 2 late payments can have a dramatic effect on your scores. In some cases, owners trust an accounts payable person to manage these bills. The issue arises when the Accountant doesn't pay attention and is late on a payment. If the accountant gets these bills directly the owner is never aware until they seek funding for an aquisition. Company vehicles typically report to personal credit as well so these accounts also need to be closely monitored.

Mistake #2. Thinking that your credit card interest is too high and trying to renegotiate with the credit card issuer by going late on your card on purpose. The mindset here is that if I am late on my card the credit card company will be more likely to lower my interest rate to keep me from defaulting. I had a customer recently who did this on a small 8k in credit card debt, this dropped their credit scores a massive amount, and now any lending institutions consider them too high risk to lend to. Keep in mind, late payments stay on for at least 2 years...trying to save a few bucks short term while jeopardizing the health of your business doesn't make financial sense.

I will be posting additional mistakes over the next few weeks to keep owners better informed about how they can protect themselves.