Are you trying to start your business, then you need to know about different terms regarding the business. One of the basic terms is business credit, that's a very common term, but unfortunately, most of the people are unaware of taking a start. Having access to capital is the main and important concern of any entrepreneur. It is the current asset that is important for paying funds or salaries, meeting expenses and purchase equipment for business operations. If the business doesn't have any credit, then it's impossible to run the operations smoothly. You need it at every step for your survival.
A credit score is basically the ability to take a credit through different sources. Mostly the credit score ranges from 0-100. The more you score, the better you're. Having a good credit score will enable you to take a credit, either by having a credit card or borrowing from the lending companies. Mostly in the business, your stakeholders, suppliers, customers and financial institutions agreed to maintain business relations with you by looking at the credit score. They're just conscious of the fact either you'll be able to pay your obligations or not. One thing which is very important that before relying on the business credit, it’s better to rely on the personal credit of the owner. This is because to improve and maintain the credit score for the financial success of the company.
There are a number of credit agencies who keep the record of the borrowers. On the basis of your credit history, you’ll be able to borrow further loan from a particular agency. Having good financial relations with the credit agency will surely increase your credit score.
Following are some of the tips to maintain a sound record of your personal credit with the credit agencies:
Let’s suppose you’re going to any credit agency, and you want to take a loan for business operations, then what will be the criteria to apply for credit? Firstly, they'll calculate the credit score for you. Now, what is that?
Here you go with the following procedure for calculating the credit score. The credit agency basically expects three types of information about your business:
After getting the information, credit score is calculated on the following basis:
As a business owner, you know the importance of finance for your operations that will ultimately meet up your goals. Having a credit capacity will make your business financially robust and successful; subsequently, you can also obtain a loan from credit agencies for your business.
Let’s go through quickly some of the best reasons for having a business credit or its importance.
It will increase the values of your company. For example, you want to sell your company to any party, once you sell it to another party, they can benefit from your work and already established goodwill in the market.
It will protect your personal mind. In the initial years of the business, you take the credit on a personal basis, but later on, this will be replaced with the business credit leaving a peace of mind and positive results for you.
Building a business credit is the most time taking process, but a slow and steady approach will able you to do this successfully.
You cannot build your credit by mixing your personal account and credit score. Obviously, the expenses of your business must be separate from your business. Business always runs on a large scale, so it’s better to keep both things separate. In the initial stage of a business life, use personal credit to run the operations smoothly, but after some time, keep the two things totally separate.
Applying for the process of federal Employer Identification Number (EIN). This is the step you’ve to do when registering your company. The social security company demonstrates your personal credit, whereas EIN shows your business credit.
Open your business checking account and credit card for your business. Initially, you may have only access to secured credit cards, but this is the important step that one should take.
Use your business account to pay expenses. Even, if you make small transactions; it will have a large impact on your credit score, especially in the long run.
Always check the status of your credit card. Don’t make expenses beyond the limit. It will leave a negative impact on the credit card agencies.
The business credit card and credit score are merely necessary for the survival of a successful company. No company can run without taking the benefit of the credit. The need here is to take control of your business operations wisely while paying the debt on a regular basis. There should be a proper management and timely payment of your debt, otherwise, in the case of poor management, the interest rate will keep on increasing. The choice is yours now!