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Wednesday, March 10, 2010
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What is Business Credit?
Business credit is simply a 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 willingness to pay.
Business credit is needed to avoid using cash to conduct
every transaction. As you
can imagine, carrying cash for each business transaction you perform
would be nearly impossible and extremely inconvenient.
Have you ever gone to a car dealership and bought a new car?
Do you own a home? Do
you own a credit card? If
any of these things apply to you then you understand that your personal
credit file is reviewed before an approval is given.
“Yeah, but that’s personal credit,” you say.
“How does that relate to business credit?”
Just as you have a personal credit report you have a Business
Credit Report. Anytime
your business applies for a loan, a lease, a mortgage, a line of
credit or even just credit terms from a supplier or vendor, a
business credit report is pulled.
In fact, now insurance companies are pulling business
credit reports to determine your Workman’s Compensation rates as
well. (I guess the
slower a company pays its bills, the higher the chance of an on the
job accident).
Your
business may be new or you may have been in business for years but
most smaller businesses are started with the owner’s or partner’s
personal savings or funds.
Many people start by using their personal credit cards to
finance the initial costs of their business.
Maybe you are one of those people.
If you are, you probably know that at some point of your
company’s growth you will no longer be able to continue funding
the company out of your own pocket.
It is time to
establish credit terms with suppliers and lines of credit with your
bank.
It is time to build your Business Credit.
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