Running a business is challenging work. You need to be consistent, disciplined, creative, and have a reliable source of capital if anything happens. As an individual, you know what personal credit is. This score is how banks or other lenders determine your capability to pay your bills and debts on time. As a business owner, business credit determines how well you’re able to take care of your financial obligations.
Lender, suppliers, and other vendors will look at your business credit to find out whether working with you will be financially risky or not. If you have a good score, they won’t have a problem giving you financial credit. It’s all about trustworthiness. If you have a good business but a bad credit score, it will be hard to justify the risk of working with you. Whether you’re applying for a business loan or trading credit, your score determines your fate.
This is why it’s crucial to build your business credit:
1. You Can Obtain Business Financing Quicker and Easier
To run a successful business, you need to expand your company when the opportunity arises. However, to do that, you need quick access to funds. Unpredictable things can happen—staff accidents, machinery breaking down, and so on. For emergencies like that, you need to make sure you have the funds to cover those expenses.
Small business loans, lines of credit, and other business financing products will be easier to get if you can maintain a high credit score. Lenders might also be more inclined to give you lower interest rates, which will help a lot with your business’s finances.
2. You Can Get Better Credit and Repayment Terms with Suppliers
Good business credit can help you immensely when you are dealing with suppliers. Say you require new machinery, more equipment, ingredients, parts, whatever your business deals in will become easier to gain and access; you can get better terms from your suppliers.
This is great in terms of business expansion. When you’re ready to start serving more clients, you will need more inventory and additional equipment. Better deals from your suppliers and vendors put your business at an advantage. It allows you to grow your business a lot faster and build good relationships within the industry. When there is mutual trust between partners and colleagues, you can get very far and find stable success.
3. You Can Protect Your Credit Score
When you have good business credit, you can better protect your personal credit. Being a business owner means you have the most to lose and the most responsibility out of any in the company. Maintaining a good credit score is a big part of your business’s success because it eliminates the need to pay for business-related expenses out of pocket.
Generally speaking, it’s not a good practice anyway to use personal credit for your business. It can get messy very quickly, and the allowable amounts are just not compatible. If you’re unfortunate enough to rack up large business debts with your credit, it could spell disaster. When you’re starting, build your business credit slowly. As your business grows, so should your score.
The Bottom Line
Good financial management is the secret to success. Your passion and creativity will be the fire that starts your business, but your financial decisions will be what fuels it all. Business credit can lighten the financial load on your shoulders. Quick access to loans and better deals from suppliers can mean a world of difference once your business starts gaining more traction.
Starting your own business will be daunting, but we can help you get ahead of the curve. At Head Start Biz Solutions, we provide our clients with the best service for great returns. Contact us today and learn more!