Why You Need Business Credit
A lot of people don’t give a lot of thought to using their own money when financing their business. At the time, it makes a lot of sense to just use the money you already have, but you could be setting yourself up for trouble later on.
If you continue with that method, using your personal credit cards to finance business growth or day-to-day operations, you could be jeopardizing your personal credit in ways you don’t even know.
You might not realize that wracking up personal debt in the name of your business is hurting you until you apply for a car loan or a mortgage, or you might have business creditors going after your personal assets because you’ve gotten into debt.
All of these scenarios highlight why you should establish business credit as soon as you can after starting your business. Having corporate credit puts up a wall between your personal assets and your business assets.
That way, all your business expenses go on business credit cards. If you accumulate a lot of debt on these cards, it won’t affect your personal credit score and thus won’t keep you from doing the things you want to do outside of your business.
The reason most businesses don’t establish corporate credit is that they either don’t know what business credit is or they don’t know how to go about establishing credit beyond their personal credit.
So they just use the credit they already have to build their business, which amounts to a lot more personal debt going on your personal credit report.
Even new businesses can establish corporate credit; it just takes a little work to be in compliance with what the lenders are going to want from your business. They are going to want to see that yours is a legitimate business that means to be profitable.
That means that you need to do everything right when you set up your business. If you want to set up your business as a corporation or an LLC, make sure you’ve filed all the correct paperwork and payed the fees required. If you need a permit or a business license for your type of business, get it.
Make sure your business has a real address and a real, dedicated phone number. All this makes it look like you’re running a real business, and will make lenders more willing to give an unsecured business line of credit even to a new business.
Such corporate credit is vital if you need working capital for your business, and getting business credit is a much better plan than funding your business through personal credit.
Trent Lee is the cofounder of Corporate Credit Concepts, a company that specializes in helping businesses get the money they need without putting personal assets at risk. Learn the nine costliest mistakes entrepreneurs make when trying to secure business credit in a free report available at http://www.freecorporatecredittips.com.
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