Starting up a business can feel like a dream come true to many, but there are several personal financial factors that can hinder one’s business growth.

In fact, according to a recent report published by the Chamber of Commerce, 80% of small businesses and startups have struggled to survive their first year of operations because owners and CEOs have made the rookie mistake of mixing personal and business finance.

Doing so not only muddles an entrepreneur’s financial life, but it also creates a liability problem and negatively impacts one’s business profile. If you’re a business owner, here’s a guide to recognize if you’re mixing your personal and business finances, and make appropriate changes to overcome these hurdles.

Credit Score

Maintaining a good credit rating may not sound as exciting as prospecting for new clients, but it is one of the key factors that can make a business grow and thrive especially in this ever-competitive industry.

More than 20% of small business loans are denied because of low credit scores, according to the NSBA Small Business Access to Capital Study. Credit scores serve as a business track record in the eyes of lending institutions and it directly affects entrepreneurs’ chances of approval.

Securing a good credit score can also open the door to lower interest rates and save hundreds of dollars over the course of a lifetime. This helps business owners avoid financial headaches down the road and make borrowing money for their business much easier. Additionally, some suppliers examine a business owner’s personal debt level and credit score to determine how much credit they could extend.


There are several things that you can do to improve your business credit score. First, take care of the legal aspects of your business and establish it as a corporation, partnership, or sole proprietorship, whatever is applicable to your situation.

Next, register your business and get your employer identification number. An EIN is a unique number assigned to your business that’s similar to a Social Security Number, and it’s imperative for all entrepreneurs to have one, whether you’re running a food truck business or a tech startup.

You should also consider opening a business bank account so you can begin the process of separating your finances.

Once all of those things are out of the way, get into the habit of paying bills and taxes on time. You should also monitor your business credit score to know if it’s accurate, and you can do so through some of the biggest agencies such as Equifax, Experian, and Dun & Bradstreet. 

Debt and Finances

Many small business owners tend to rely on funding sources to survive tough financial times including outstanding invoices, liquidity problems, along with other cash flow issues. But in many situations, debt can be a serious burden for small business owners and can even lead them into forced bankruptcy.

Studies by Mastercard have shown that 46% of small business owners use their personal credit cards to fund business-related debts and expenses. To mitigate its negative effects, it is important to keep business funds separate from individual finances through a business checking account.

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Moreover, use your business credit card instead of your personal credit card for business expenses. This will help entrepreneurs make wise financial decisions about their business and get an accurate picture of the growth of their business. 

However, if blacklisted by ChexSystems, there are many alternative banks that can help separate the legal entity from its owner. There are also banks and credit unions that don’t use Chexystems to track the financial history of an applicant, enabling you to open a business checking accoint.

These institutions include Chime, Sable, Current, Langley Federal Credit Union, SoFi Checking and Savings, Renasant Bank, FSNB, and 1st Convenience Bank.

Some of these banks are classified as second chance banks, and while they may still use ChexSystems, you’ll find that they’re still willing to let you open a checking account. However, keep in mind that you’ll be required to pay a monthly maintenance fee or have a certain balance requirement. 

Tax and Deductions

Another factor that may potentially affect any business’ financial capacity down the line would be tax and deductions. Blurring the lines between business and personal funds can lead to serious issues when things go wrong and awry.

On the other hand, keeping accurate records of business and personal expenses can provide plenty of benefits, such as tax advantages and asset shields. By detaching oneself to business finance, business owners can avoid the risk of losing everything if their business has to fail at any stage.

Establishing a clear line between business and personal accounts also has a direct impact on one’s ability to file taxes, track invoices, deductions, along with other business transactions. In addition, business owners can avoid double taxations and pass-through deduction by 20% of their business income, according to the Tax Cuts and Jobs Act of 2018.

Combining personal and business funds is considered a risky practice that will ultimately affect the bottom line of any company. Avoid this issue by managing all business-related inflows and outflows using a separate business account instead of a personal one. That way, small business owners can organize their funds in an easy and accessible way.