Why Build My Business Credit
Although the lending market is always changing and evolving the one thing that is constant is business credit.
In a recent interview with Franchise Gator I answered a few questions about the importance of building business credit. Here are some of the highlights from that interview.
What are the most important lessons you’ve learned in your career about funding a business venture?
“An important lesson I’ve learned is the power of business credit and the leverage it provides. The stronger the credit you have both personally and for business, the more options you have and the better the terms and rates you’ll receive.”
To add to that, remember there are funding programs that look at factors other than personal credit alone such as revenues, outstanding invoices, purchase orders, business assets, etc.
“If you run a company, your business credit profile is related to your reputation. With a strong business credit profile I’ve learned that you simply have much greater access to financing opportunities compared to relying on personal credit alone.”
Remember, Dun & Bradstreet, Experian Business, Equifax Small Business, etc. are much more than business credit reporting agencies. Not only do they store massive amounts of data about businesses, they also sell your company’s credit information to banks, lenders, credit card issuers, and insurance companies.
For example, business credit reports are regularly sold, often without your knowledge or permission. They also engage in “trigger leads.” A trigger lead occurs when your company applies for a loan and the lender obtains your business credit report. The inquiry now becomes part of the business credit agency’s trigger lead program.
Why should business owners consider building business credit rather than investing their personal credit or assets?
“One of the main reasons to build business credit is to separate your personal and business finances. In addition to making filing taxes and tracking expenses easier, it helps you preserve the liability protections that you get from incorporating your business.”
Another major reason why building a creditworthy business is crucial lies in the ability to maximize your funding ability. The fact is businesses have 10 to 100 time’s greater credit capacity compared to personal credit alone. When lenders have the ability to assess your company’s creditworthiness via a business credit report; the more accurate picture it will have on your company’s overall profile rather than having to rely on personal credit alone.
How can business owners and entrepreneurs make themselves more attractive to lenders?
“First and foremost, ensure the company credit profile represents a real business. The information you supply about your company, its background, banking history and operations plays an essential role in the credibility and creditworthiness of the business. With a complete business credit profile, lenders will get an accurate portrayal of the business.”
I also recommend checking out my latest post on 25 Reasons Why Business Credit Applications Get Declined. It’s important to remember that the credit review process is different with every lender, supplier and financial institution. Before you apply for business credit have several trade references ready and check your personal and business credit reports so you know where you stand beforehand.
What are the most important questions business owners and entrepreneurs should ask credit card companies about their products?
“Although perks and rewards play a role in the decision-making process more emphasis should be played on rates, and terms & conditions. Ideally a business owner should prefer a card that carries high credit limits, a low annual percentage rate, and reports payment activity solely to the business credit reporting agencies.”
Remember, just because a credit card is labeled as a business credit card doesn’t mean it helps build your company’s credit. The majority of all the business credit cards in the marketplace report to the personal credit reporting agencies.
The good news is our UBF program will help you obtain multiple business credit card accounts that report only to the business credit reporting agencies.
What are good habits they should adopt to maintain good credit?
“Pay all invoices on time. The promptness with which a business pays its bills is one of the key factors that impact business credit scores. For maximum impact, a business should pay invoices 10 days or more ahead of the due date.”
Another good habit to practice is keeping your credit utilization below thirty percent prior to applying for a loan or business line of credit. Avoid exceeding your credit limits at all costs and pay more than the minimum payment on revolving credit accounts.
To read the entire interview article on Franchise Gator check it out at:
Until next time.
Now that you know why to build business credit are you ready to get started? 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 ($497 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, Business.com, 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’.