Small business ownership—When business becomes personal

Protect your assets

Small business owners need to watch that business cash needs don’t drain personal resources. Learn to protect your personal finances from your business's cash demands.

Most owners use personal resources when launching their business.

Graphic displays 65% of business owners use their personal savings to start a business.
Graphic displays 30% of owners sell or mortgage personal assets to launch their businesses.

Business cash reserves or loans can support ongoing cash needs.

91% of businesses have experienced shortfalls.
The average small business keeps 4 months of cash reserves.
36% of owners used a business line of credit/business credit card to cover cash needs.

Sometimes owners need to turn to personal funds for cash.

Most owners used personal funds to cover cash shortfalls and others used savings, retirement plans, personal loans, mortgages, and credit cards.

Business cash shortfalls can affect the owner's personal cash flow.

Here's how many small business owners respond to business cash shortfalls:

40% of small business owners cut personal spending to respond to business cash shortfalls.
37% of small business owners reduced dividends to respond to business cash shortfalls.
37% of small business owners cut back on salary to respond to business cash shortfalls.

Want to do a better job managing business and personal finances?

Take these steps:

Step 1

Separate your business and personal finances.

  • Separate your accounts and records, and use tools designed to manage your business finances.
  • Use bank accounts created for small businesses, like checking accounts, debit or credit cards, savings and money market accounts (MMA), and loans or lines of credit.
  • Get insurance for your business needs, like liability, workers compensation, key person coverage, and cyberfraud.

Step 2

Pay yourself consistently and create lasting value.

  • Anticipate business cash shortfalls, and plan for how to cover them.
  • Use advisors like your CPA, attorney, banker, or business coach to determine the best mix of owner compensation, distribution of profits, business real estate ownership, and retirement plan contributions to meet your personal financial goals.
  • If your business could be a saleable asset, build its value to get closer to your financial goals.

Step 3

Protect your personal finances.

  • Manage your dependence on your business with secondary sources of income or family working outside the business.
  • Diversify you investment portfolio to avoid risk from concentration, especially in the same industry as your business.
  • Create a succession plan for your business once you’ve stepped back or moved on.
  • Use a financial planner to help you evaluate your business and personal finances holistically, so you’ll have what you need while working—and when you retire.

Have you done what’s needed to secure your business and personal finances?

Ask your branch leader how Truist can provide you with solutions or advice to help manage your business smartly and safeguard both your business and personal assets.

Source: Truist conducted research with 527 small business owners ranging from $100,000 to $2,000,000 in annual revenue in the first quarter of 2021.