Are you thinking about using your personal funds for growing your business? You swear that you’ll repay it in a few months when business is stronger, but it’s not possible to foresee changing circumstances that might make that impossible. It’s far safer for your personal finances if you avoid co-mingling personal and business funds altogether. Your bank account isn’t an endless source of capital, and your personal finances will suffer if you don’t maintain clear boundaries between your business and personal accounts.
Still not convinced? Here are five reasons you need to keep your personal funding sources separate:
#1: Lost Savings
We all have dreams, and our savings help us accomplish them. Whether you’re dreaming of financial independence or owning a beach house, co-mingling personal and business funds could mean that your savings diminish and you aren’t able to pursue those dreams.
You also lose financial security as your bank account shrinks, and could put you one financial crisis away from personal bankruptcy. Be smart and keep your business finances away from your personal savings account: you never know when you’ll need that money for an emergency.
#2: Lost Assets
Liquidating your stocks and bonds or taking out a loan against your mortgage may feel like a sensible way to get a huge amount of capital quickly. But when you liquidate your personal assets to help your business, you’re only harming your personal finances (and nuking your net worth). The fewer assets you have, and the lower your net worth drops, the harder you’ll find it to pursue financial growth in your personal life. You could find yourself starting over from scratch in a few years, when you’re far past the prime of your life.
#3: Credit Card Debt
Another common way that entrepreneurs co-mingle their business and personal funds is by charging company expenses to a personal credit card. This is complicated in a number of ways: First, you can’t accurately track those charges with business accounting software, so you’ll find that business charges never show up in your records unless you manually add them.
Secondly, you can’t repay your personal debt with business capital without needlessly complicating your finances even further, so you may end up dipping into your savings or using the Christmas bonus from your day job to pay it off, putting your personal finances even more into the red.
#4: Lost Investment Opportunities
Every dollar you put into the business is a dollar that could be working for you and generating more money. Keep your investment accounts intact: they’re doing more good for you than pouring that same cash into the business would. For instance, if you have $1 million in an investment instrument that pays a 4 percent return annually, that’s $40,000 a year simply for keeping the money in the account. Once you take out that million and use it for your business, it’s no longer generating interest; and you’re now indebted to yourself.
#5: Lost Retirement
There’s a reason that financial advisors tell you to start saving for retirement as early as possible. It takes a lifetime to save up enough money to coast through retirement worry-free. Once you start dipping into your retirement account, you’re slowly eroding the foundation that you’ve built your retirement upon. You may not have the income or the time to rebuild it, and you’ll find yourself retiring later and working harder.
Fund Your Business Expenses the Right Way
If you’re convinced by now that co-mingling personal and business funds isn’t the way to go, you’re probably wondering if there’s an alternate solution. The solution to your problem is simple: you can build a relationship with a business lender and get the funds that you need to turn your business around fast.
When you choose a lender like Mulligan Funding, you’re getting expertise and compassion, not just capital. You also get quick approval, manageable repayment terms, and flexible lending options to ensure the process is as seamless as possible.
Depending on your current business needs, you may find that a working capital loan offers the help that you need. For more flexibility and uncertainty, a business line of credit could be the right solution. Not sure which? Check with Mulligan Funding, where an expert is happy to guide you through the lending process.
Don’t jeopardize your financial independence and your retirement. Keeping your finances separated is the best choice for the long term; and you have options when it comes to finding the business funds that you need. Call Mulligan Funding at 855-326-3564 to discuss your financing options today!