Business credit is very important not only for your personal finances but for your company as well. Having good business credit can help you quickly resolve cash flow issues. When you apply for new business loans from a lender, potential lenders will also look at your company credit history. A high business credit rating will improve your odds of getting approved for new business lines of credit, small business loans, or other small business funding products. To learn how to create and maintain a high credit rating for your company, keep reading.
There are several main reasons to have good business credit. First, a lender or creditor will be more likely to extend a small loan to you, if you have a history of timely payments. This history shows that you will be responsible with the money you borrow and that you won't default on any of your payments. Lenders and creditors use your business financing capabilities, such as your ability to pay your bills on time, to determine whether or not you are a good risk.
Secondly, a good credit score makes you a better borrower. When you need money fast, lenders and creditors are much more likely to approve your application if you have the extra power of good credit. In fact, this is one of the main reasons most people get fast business financing – because they have a good credit score.
A higher business credit rating gives you more options when it comes to finding funding for your startup business. Since you've worked hard to establish your good credit score, you can typically get access to more funding than those with lower ratings. More lenders will be willing to lend you their money, if you have access to capital that doesn't depend on your past credit history. Some will even be willing to finance you in full, instead of just half of your required amount. As your business grows, you can then take out larger loans from more lending institutions.
The third reason for having a good business credit rating is due to the importance of keeping personal finances separate from your company finances. Most large corporations hire internal accountant services to keep track of the various finances of the company. This is usually done per year, quarterly, or monthly. However, smaller businesses usually don't have someone doing this, and the resulting chaos can lead to mistakes in accounting and other problems with the business' finances. Having a solid financial system, which is run independently of your company, will help to ensure accuracy in your financial records.
Finally, business credit cards allow you to build business credit faster than you could do with traditional loans. When you have more available funding, you can then offer your suppliers better deals. You can also offer better incentives to your suppliers to stay within your guidelines on price, timing, quality, and more. With the right lender, you can easily build business credit cards and offer attractive financing terms to your suppliers and customers.
Another reason for why business credit cards are so useful is because they build your credibility . . . . . . with suppliers. A credible supplier means more business, more profits, and ultimately more success. When a supplier knows you have a good trade credit history, they may offer you special pricing for your products and services. They may even provide training or other options to your future suppliers. If you have trade lines, you can build credibility as well by showing prospective suppliers that you are serious about building your trade line. Your credibility is built when you accept trade lines from qualified suppliers and when you make sure to repay trade lines quickly when they fall behind in payments.
The fourth reason why business credit cards are helpful is because they can help you avoid potential spending and debt. With your personal credit score, you can determine how much money you can borrow for various purposes, including buying items for your business. With a larger amount of money at your disposal, you can then use that money wisely to make purchases. This means that if you have more than enough money to spend, then your personal credit score isn't as important to lenders as it might be. As long as you manage your resources so that you have sufficient funds available for your business transactions, then lenders won't be as concerned with your credit history when providing you with financing.