Business credit has replaced the old days of cash and carry. Today, building business credit is crucial for any company that wants to open a franchise or expand into other markets. Whenever your business applies for a loan, lease, mortgage, or line of credit, a business credit report is pulled to make sure you're able to make the required payments.

So, what is business credit? It's easily defined as the "picture" of how a business handles its financial obligations to its suppliers and banks, addressing not only the company's ability to pay but also its own willingness to pay. Business credit is needed to avoid using cash to conduct every transaction. Can you imagine carrying cash for every business transaction your company is involved in? It would be virtually impossible and incredibly inconvenient.

In order to ensure your company is successful in the local and global market place, it's important that you build business credit. Not only will it help you secure loans and lines of credit, but it can also help your company when it comes to determining issues like workman's compensation rates, as it's become common practice for insurance companies to pull business credit reports in order to determine these prices.

It also helps to establish business credit, in order to stop financing the costs of your business on your own. Though many small business owners may have initially started their company with personal savings or funds, they know that at some point of the company's growth they will no longer be able to continue funding the company out of their own pocket. Thus, the time has come to establish and build business credit.