What happens when you can’t pay your small business loan?
Written By: admin on December 2, 2009
3 Comments
I am looking to form an LLC to buy an existing business. I am looking to secure a loan. My largest dread, as anyone’s would be, if the business fails, what happens to the loan? Its a retail business so there will be assets that can be sold but what if its not enough? can they come after my personal assets? Even if they are not place up as collatteral? also, will my personal credit history be ruined if my LLC goes bankrupt and defaults on a loan?
Related Posts
Tags: fear, personal assets, personal credit history, retail business
A right business credit card is a line of credit that is taken in the name of the business, under the business’ credit. Activity, whether excellent or terrible, is reflected on your business’ credit report through D&B and other financial institutions, and the liability for any debts incurred and bills owed is with the business.
But, some companies out there offer "business" credit cards which they require a person guarantee for. These institutions will often question for a personal guarantee, and will nearly always question for a social security number from the person applying for the card. If this is the case, the credit card is not a business credit card, but is simply a personal credit card which is used for the business. The business is not liable for bills and debts – you are.
When applying for a credit card for your business, watch out for areas asking for your SSN (and not your TaxID or EIN) and be wary of any credit card that questions for a personal guarantee. By ensuring that your credit card is in the name of your business, you can help to build your business’ credit, while avoiding making problems with your own.
Many companies offer a list of credit cards that are issued under the business name only. Those lists typically run $300-$900, depending on the quality of the information inquiring. I would suggest starting your search online via google or yahoo. Search for "strong business credit" (just like that in quotes) to find services that sell the information.
Excellent luck,
Ilya Bodner
Small Business Owner
Initial Underwriting Group
ur business could be auctioned
More than likely, you will not get a loan without putting up some personal collateral such as your equipment, inventory or even your personal collateral like your home.
If the loan defaults, the bank gets the collateral.
A LLC only protects your assets from liability – not bankruptcy.