The two sides of debt – business and personal

Debt is an everyday occurrence once we reach adulthood. From financing our first car, getting a student loan, putting an overseas trip on the credit card, to a home loan, being in debt can seem like a rite of passage.

Yet there’s a substantial difference between normal personal debt and racking up corporate debts that can affect your businesses credit record and its reputation.

If you’re a director of your business, the line between personal and company debt isn’t as far away as you think. Just as you are personally liable for any health and safety issues in your business, it’s the same with debt.

What exactly is the difference between personal and corporate or company debt?

Personal debt is debt that you are legally responsible for as an individual. Though the name might suggest a single individual, personal debt can actually involve more than one party e.g. you and your partner getting a home loan.

An easy way to think about this is that personal debt is used to fund consumption.