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The Difference Between Company Debt and Personal Debt

By: Michael Millington


There’s a big reason that personal debt is talked about much more than business or company debts. It’s much more important to the individual than anything else. Personal debt can seriously hinder a person’s financial ability. However, for those who own and run businesses, the line between personal debt and company debt can be hard to discern. A great many people pour their lives into their business, so much so that their business becomes their life. Business needs can take on personal weight, and money meant to be kept away from the business can be made to bolster its financial need. Regardless, there is a large difference between what constitutes as personal debt and business debt.

 

Personal Debt

As everyone may already know, personal debt has to do with items for personal use. These items can include things like credit cards, personal loans and other similar financial products. Personal debt can also involve other obligations with more specific uses (such as student loans or medical bills). The nature of personal debt can have multiple purposes, but it generally has the same effect on your credit.

As your personal debt fluctuates, so does your credit. The better you do with your personal debt, the better off your credit will be. There are multiple factors that go into influencing your credit when dealing with debt. All aspects of debt play a part, from the amount of open accounts you have to the amount of debt you owe at any one point in time. This will end up impacting your ability to utilize your creditworthiness into the future. Qualifying for credit cards and loans is completely influenced by your creditworthiness.

 

Business Debt

Much like the name implies, business debt solely deals with debts incurred by your small business, company or corporation. The ways that a business can incur debt has the most to do with how your business’ money is spent. As with many business models, there must be a budget involved. While people can have budgets for their personal lives as well, one is understandably crucial to the survival of a business. Many levels of spending, from employee wages to research and development, must be monitored and accounted for. While a business budget does require a bit more planning and stricter rule following, it does offer the simplicity when it calls to be changed

 

There is also a grave difference in how credit and debt is dealt with for individuals and businesses. In many instances, businesses are dealt with with more accountability, perhaps due to the higher stakes that businesses face. In the case of debt collection, individuals have more restrictions placed on them to protect their liberties and rights. Businesses are dealt with more loosely due to their (sometimes) inherent nature to do better business with creditors.

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