What is the difference between small business lending and me borrowing the money for the business?

If you, as an individual, borrow money, using your personal assets, then put that money into your business, normally, a few things happen to you that you were not planning for.

The first thing is by using your personal credit your banker will be looking at both your personal debt AND the business debt when calculating your debt burden.  This may severely restrict the amount your banker will be willing to loan.  Yes, in many cases your may have to provide a personal guarantee on your business loans, but the amount of personal debt is NOT added to the business debt for debt burden purposes, as far as the credit market is concern they are two different type of debts. Most business debts do not show up on your personal credit report and that should be very important to you. Why is this important? Your credit scores are directly affected by the amount of debt you have. If you want to purchase or refinance your home you need to meet certain debt to income ratios to satisfy the bank for them to loan you money. Many of these problems can be solved if you structure your business debt correctly.

So can I go back and correct any debt structure mistakes?  What should I do and how do I correct this?  

Believe it or not it may not be that hard. The best place to start is to sit down and make a list of assets that belong to your business itself and restructure your borrowing so that it is based on those assets, to any extent possible.  That alone may be enough to get your business debt off of your personal balance sheet.  Always use business assets for business loans instead of your home or using personal credit cards.

We, here at Blue Water offer restructuring of your business debt by using your equipment, receivables, and inventory for financing instead of your home. Yes, you are going to pay more because of the interest rate but you will raise your credit scores and separate what belongs to you and your family from what belongs to your business. Also, this business interest may be deductible against your business income, check with your tax advisor. Separating business debt from personal debt should be part of your estate planning, as well.

Equipment financing can be a great way to finance your business. Why should you lease it instead of financing it at your bank? Again, one word, TAXES. Under normal circumstances, all of the lease payments are 100 percent tax deductible, instead of just the interest. Please check with your tax advisor.

Using our system of recapitalizing your equipment is basically a sale lease back. This is where you would sell your equipment to a vendor, which Blue Water can arrange in most cases, and then you lease the equipment back through Blue Water. At the end of the lease the buyout value of the lease is normally one dollar. The money from the sale of course goes to you, to be used as you see fit, working capital, expansion, and so on.

These are a couple of ways small business lending works. Taking your assets and converting them to cash, reducing the business debt that is on your personal credit report and helping you grow your business.