#1 Reason to Start Building Credit for Your Small Business

Are you leveraging your greatest asset?


Building a creditworthy business has many unique advantages that small business owners simply cannot ignore.  Potential business partners, investors and lenders may check business credit reports to evaluate how reputable and financially responsible a business is. Without an established business credit file, more emphasis may be put on the strength of the individual owner’s personal credit reports.

The fact is business credit enables a company to gain access to financing whether it’s for purchasing materials, expanding inventory, hiring additional staff, or acquiring equipment. If you build a creditworthy business you may gain access to additional financial resources only available to companies that meet certain credit requirements.

Other benefits consist of the fact that numerous loan providers as well as lease carriers base their rate of interest on the strength of the company’s business credit ratings. Positive scores and good credit history could result in astonishing cost savings in rates of interest and also more favorable lease and lending terms.

Without a strong company credit rating, a financial institution or supplier may certainly utilize individual credit ratings as its major factor in assessing risk. However, by getting a DUNS Number and establishing a D&B report and positive Paydex® Score, your business may receive more favorable terms and larger credit limits.

These are among a few of the many examples why building credit for your small business is essential.

The single greatest reason to start establishing credit in your company’s name is protection. By building corporate credit you end up protecting your personal credit ratings and limit your personal liability.

Did you know over 65 % off all small companies use credit cards for business purchases; yet less than half of those credit cards are in fact in the business name? The others are continuously utilizing personal credit cards for day to day business purchases.

Using personal credit as opposed to building business credit is a bad idea on numerous fronts. Solely relying on personal credit ultimately impacts your credit scores, credit utilization ratios and overall personal credit profile. This can have a direct impact in the financing capability you have as an individual when it comes to obtaining an auto loan or a home mortgage.

Additionally, when you use your personal credit cards for business purchases it may jeopardize the protection of the corporate veil. Avoid co-mingling funds at all costs by separating personal and business expenses. Consider obtaining a business credit card and establish a separate business checking account for starters.

Failure to completely separate personal and business finances may put your individual possessions at risk and may make you directly responsible for payment of any sort of delinquent debts sustained by your company. It's in your best interest to start building credit for your business rather than co-mingle funds - this includes the "co-mingling" of credit report profiles too.

Finally, what could be acceptable for a business, such as higher credit utilization and large credit limits reporting on the business credit report; may have a potential issue when it comes to personal credit history. Too much credit exposure may be seen as a potential risk for a lender but if you maintain low credit utilization ratios and don’t have a history of overextending your credit limits you should be fine.

As you can see building business credit will always beat personal credit when it comes to business. The fact is you can obtain ten times the credit capacity as a business than you could if you simply rely on personal credit alone.

If you are in the early stages of launching a business or own an existing one now is the time to establish credit in the name of your company.