During the early stages of starting and operating a business, many small business owners have become accustom to using personal credit cards to finance purchases, equipment, and even payments to suppliers or vendors. What’s even more alarming is if you personally guarantee each and every credit card, credit line, or loan for your business then you are putting your personal assets and family at risk!
This leads me to ask you “What has business credit done for you lately?”
Statistics show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name.
The single greatest challenge facing small business owners is awareness. Less than ten percent of business owners in America know about let alone understand how business credit is established or how to even generate a business credit rating.
Business credit can do much more than personal credit can or ever should do for your business!
So what is business credit?
It’s the ability to obtain financing under the name of your business entity without using personal credit. Business credit should be separate and based on the corporation’s credit worthiness not yours! Recently Entrepreneur Magazine was quoted as saying “You should differentiate your personal credit from your business credit.”
Entrepreneurs and small business owners who have a separate legal entity for their business have a unique opportunity that no other individual or sole proprietor has. It’s the ability to establish a business credit profile that is completely separate from a personal credit profile.
If you think you’re business is doing just fine and you don’t need the credit think again! The reality is that every business will at one point require an influx of cash in order to cover unforeseen operating expenses, development, expansion, legal fees, inventory or a range of other items the business may require in order to grow. Adopting a ‘cash only’ strategy is a good plan but should never be the only plan.
After the recent economic downturn today’s small business owner is facing a new era when it comes to business financing. Banks, lenders, suppliers, leasing companies and others are making adjustments, adopting new rules, and facing new regulations in the lending arena.
Now more than ever you need to be pro active and establish a new level of financial preparation including a strong business credit profile, a favorable business credit rating, and a solid bank rating. Wells Fargo states “The longer you delay establishing business credit, the longer you delay taking advantage of business loans.”
One of the key advantages of having business credit is instead of putting your personal credit and assets at risk every time your company requires financing you would now be in a position to secure the financing you need with your businesses’ credit. Here are some other benefits of building business credit:
1. Any debt you accumulate for the business would only report to your business credit file not your personal credit file.
2. Eliminate the co-mingling of funds–and this includes the “co-mingling” of credit profiles so you won’t jeopardize the protection of the corporate veil.
3. Protect you and your family from personal liability when you get approved solely on your businesses’ credit file.
4. Improve your personal debt to credit limit ratios by transferring the balances of business debt used with your personal credit to your business credit.
5. Eliminate personal liability you have on your existing business debt by balance transfer from personal credit to your business credit.
6. Increase your personal credit limit availability for you and your family.
7. Increase your businesses’ ability to obtain cash credit 10 to 100 times greater than you can obtain personally.
8. Improve the appearance of your businesses’ funding capacity and stability.
9. Eliminate inquiries on personal credit when applying for business financing.
10. Last but not least you SAVE MONEY! For example, an individual might pay up to 13% interest on a $100,000 line of credit whereas a business could qualify for an interest rate of 7%. That would save you almost $40,000 in interest alone.
CLICK HERE to become a business credit member and discover what business credit can do for you!
To Your Success!
Marco Carbajo
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of http://www.startbusinesscredit.com . Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below =>
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