Etsy, eBay, and Paypal: Refinance Loans and Small Business Credit Issues

More Americans than ever before are involved in small business. Before you count yourself out of that group of people, ask yourself if you’ve ever sold on eBay, Etsy, CD Baby or elsewhere. If you have, technically speaking you are a small business. Sure, the IRS may consider your income generating activities as “hobby income” until your work reaches a certain point, but there is still some interesting advice out there that affects you and your personal finances as related to your small business activities.

Inc. Magazine published an article earlier in 2012 titled, “The Credit Card Mistake That Could Destroy Your Company”. That article is definitely aimed at full-time small business owners, but we found some advice that definitely applies to the average hobby business person who has sold enough to justify opening up a separate account for their eBay or Etsy sales.

According to Inc. Magazine, “It’s easy to reach for plastic. More than 180 million people in the United States have credit cards, including 80 percent of the small business community. However, a credit card isn’t always the right choice for a small business owner. Using credit cards can sometimes put both your company and your personal finances in jeopardy...there are a few things you should know about business credit cards”.

Paypal offers credit cards that could technically be used for small business--who doesn’t love the convenience of buying and selling online using Paypal? And there are plenty of banks who offer business accounts for the indie start-up small business person. But Inc. Magazine says it’s a mistake to assume all credit cards are created equal--or have different protections than consumer credit cards.

“Contrary to popular belief, small business credit cards do not shield business owners from personal liability. Every major credit card issuer holds both the company and the small business owner as an individual liable for the debt.”

But for anyone looking for a home loan refinance, here’s the most important piece of advice Inc. Magazine has to offer--don’t assume your business credit and personal credit are separate entities. “The major credit card companies pull applicants' personal credit reports when making approval decisions for business credit cards. In fact, your personal credit standing has more of an impact on your ability to land a business credit card than that of your company.” That can also apply when a borrower applies for the refinance loan--your business debt could be a factor in your debt-to-income ratio. Something to consider when reaching for the plastic at the same time you want to refinance a home loan.

Rate this item
(2 votes)