Credit for Your Business
The formula for success in business requires drive and dedication, and the ability of staying power. But make no mistake about it; credit is the component that ultimately makes a company sustainable and valuable too. The fact is business credit is an asset and considered an economic resource that make up the financial foundation of a business.
Although cash is king the reality is every business – at one time or another – has cash flow challenges. It can be from a major account falling behind on paying you, to a slump in sales, to other unforeseen expenses.
The fact is, even though your company may be running just fine now, you can’t predict what may happen in a few months from now. You may find yourself in a position where you are having a hard time paying a supplier or needing to purchase and/or upgrade equipment – without enough cash in the bank.
While the ideal thing to do is to have enough money saved to handle cash shortages like these, the next best thing is to have credit available for your business. According to Dun & Bradstreet, credit is at the heart of every successful small business. They need to borrow from banks, suppliers and others in order to survive and thrive.
Do you remember the 2007-2008 “credit crunch”? Credit lines for businesses were cut back drastically as lenders lost confidence in the ability of companies to repay credit. As a result thousands of businesses found themselves in financial crisis with many forced to lay off employees and close their doors. The impact of the credit crunch showed just how important credit is to the small business community.
Here are four good reasons to get access to business credit:
1) Cash on tap when you need it most. The benefit of a business line of credit or a business credit card is you can tap into the money any time your company needs cash. Think of having access to credit as a safety net to hold the business over until additional revenue comes in.
Remember, business credit lines are revolving and are meant to be used, paid off, and then used again as often as your company needs it. However, if managed improperly a revolving credit line can get you into trouble since compound interest ads up fast, so be cautious of carrying too much corporate debt.
2) High available credit limits. Business credit has many advantages that business owners simply cannot ignore. For starters, business credit carries ten to one hundred times greater credit capacity compared to personal credit. The fact is creditworthy businesses have much stronger leverage when it comes to securing financing. Without utilizing business credit, a company owner will need to rely on his personal credit alone.
3) Protect personal credit. Various types of business credit such as trade financing completely separate the credit reporting and liability from that of the business owner. Other credit sources such as unsecured lines of business credit may require a personal credit check in order to qualify but upon approval the credit card issuer only reports to the business credit agencies.
This separation prevents the company’s purchases and revolving debts from reporting onto the business owner’s personal credit reports. Only in the event of a default in payment may it impact both the business and personal reports if the owner signed as a guarantor.
4) Establish a company asset. As you use credit for your business and make timely payments you are establishing positive credit history. As you build strong business credit reports and ratings you are in fact building a corporate credit asset. A creditworthy business has value because it has greater funding potential. Because this corporate asset is fully transferable with the business it makes it very attractive for a potential buyer or investor.
As you can see the connection between having access to credit for a business and success go hand in hand. Getting the cash you need when you need it most is crucial to successfully running and growing a business. Good business credit is the lifeline of a business. It’s the door to getting the funding you need at the maximum amount and at the best available rates and terms.
Ready to build business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>
To Your Success In Business and in Life!
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.