Starting a new business can be an exciting adventure, with a lot of satisfaction as you reach your goals. Like any adventure, though, you need to be prepared. Your life as a new entrepreneur has challenges along with the possibilities. The better you understand common startup mistakes, the easier it is for you to avoid them.

Taking on Too Much Debt

It’s normal to look for funding for your new business. After all, there are many details you have to take care of, such as leasing a building, hiring employees and ordering inventory. These things require considerable capital, and you may not have enough money saved up to cover them out of pocket.

You need to view financing in the right way, however. Think of it as a powerful tool to use with precision, not a bandage for every issue your business faces. In other words, get working capital, but use it sparingly. Your business needs to stand on its own two feet.

Using Personal Credit Cards

Some startup owners use their personal credit cards to finance everything their business needs, but this is another mistake. Not only does it make figuring out your finances a pain, but it can also complicate matters for your business down the road.

If you intertwine your personal credit with your business credit, both can suffer. For example, if your personal credit rating drops, your business can suddenly have trouble with its normal operations. If you fall behind on business payments, your own rating can take a hit.

To avoid this issue, apply for a startup line of credit in your business’s name. This option provides a small amount of funding for business needs at the beginning and helps you build up your company’s credit rating naturally. As you build a solid reputation, you can qualify for a larger funding amount, lower interest rates and better terms.

Hurting Your Company’s Credit Rating

One area where new entrepreneurs can accidentally hurt their company’s finances has to do with your credit utilization ratio. Your company’s credit score doesn’t only depend on paying your bills on time. The total amount of credit you use also has an impact.

If you receive approval for a line of credit for $10,000, for example, you should try to avoid using more than $3,000-$4,000 at a time. If possible, never “max out” your line of credit for any reason. As you pay back the amount used, it becomes available again.