“Why Business Credit Is A MUST For Every Business Owner!”
In this blog, you will learn all about the importance of business credit and why every business owner should be looking to get it. It will show you how important it is to have great credit, what the benefits are and how to go about getting a strong rating.
The importance of having a strong business credit rating cannot be over-emphasized! So today we’re going to talk about why a great business credit rating matters so much, what some of the benefits are and how one goes about getting one.
Before I go any further, let me first make it clear that what we’re talking about here is business credit.
I’m not referring to individual credit scores or private sector scores, but business credit in general. This includes a lot of different types of businesses as opposed to just the private sector or the individual.
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Right now, I’m going to talk about the benefits of having a good business credit rating but first, let me just briefly explain a bit about what good business credit really is and how it operates.
What Is Good Business Credit?
The starting point for any discussion of business credit is to establish the difference between good credit and bad credit.
Bad or substandard business credit often means that you simply do not have any. This is a very common scenario in business and it can lead to serious frustration for many people who aim to start their own business.
You cannot argue with statistics. In the United States, over 97% of all small businesses fail within the first five years due to lack of operational capital or business skills. The U.S Department of Commerce reports that half of these new businesses fail due to financing problems, most often related to poor credit. So while having bad credit may not be the end of your business ideas, it could make it a lot harder to get started and could certainly make things harder for you later on if you do decide that opening your own business is right for you.
There are two things that can help you become a good credit risk: experience and good business credit.
Credit Score Experts recommends a minimum of a business credit score of 720 to be considered safe and eligible for financing. This means that chances are pretty much any kind of debt you carry with you, regardless of the source or type, is not going to have an adverse impact on your business development.
You will never hear me say this from this blog if you have bad credit or that it’s something to be ashamed of; the truth is, I’ve dealt with more than one business owner who has been denied loans because they did not meet minimum requirements in terms of lending criteria such as having a high credit score.
A good business credit rating is an important tool that can help a business owner deal with problems such as these, especially when it comes to financing. So it’s important that we clearly define what a good credit score actually is.
What Is A Good Business Credit Score?
In order to determine whether or not you have a strong business credit score, it’s important to first understand what scoring is and how the system works.
Good Business Credit Scores are usually determined by your average business credit score over time.
A business credit score is a three digit number that measures the likelihood you’ll pay back any loans or debts on time.
How Do You Build A Good Business Credit Score?
To build a good business credit score, you need to first make sure that your business is actively managing accounts.
As always, prevention is better than cure so it’s best to make sure that you are monitoring and tracking all your accounts on a regular basis. This will help to ensure that there are no errors in reporting and that any errors can be rectified immediately. It will also allow you to spot any potential issues with your accounts such as misuse of company funds before they become a major problem.
How To Build Your Business Credit Score?
The main way to build your business credit score is to maintain good business credit. To keep your business credit rating good, you need to make sure that you always pay on time and that you only deal with reputable businesses.
When you deal with a reputable business, it will help your overall profile and will increase your chances of finding more financing in the future should you ever need it. In addition to making sure that you pay on time, one of the best ways to build a strong business credit score is by creating a positive payment history.
How To Build A Positive Payment History?
The eight steps to building a positive payment history are:
Open accounts only with reputable businesses.
Make sure that your accounts are reported correctly to the credit bureaus.
Build a good credit history by paying all your bills on time. Use only the available credit that you need.
Repay debts promptly and never default on any loans or obligations – this includes things like late payments, returned checks and loan defaults. Never close any accounts until you’ve paid them off; this will help to keep a clean payment history.
What Are The Top 3 Ways To Build Good Business Credit?
As I’m sure you’re aware, there are a lot of different things that can go wrong with a business and ultimately cause a business owner to lose business accounts or even have their credit rating drop. So in order to build a strong credit history, it can be helpful to make sure that you avoid the major mistakes that most people make when opening new accounts.
The three most common mistakes that people make when building their business credit score are:
Over-utilizing available credit
Using bad business name – even if your name is on the account, use your real name. Try and avoid using company names as it can look bad on your account, even if it’s all legal.
Incorrectly reporting your accounts to the credit bureaus.
These mistakes not only affect the business credit scores of individual business owners, but they can also undermine the overall credit scores of businesses that may have more than one person running it as well. So while they aren’t necessarily a direct negative to a particular business, these mistakes can negatively impact its ability to gain or hold on to an account.
Conclusion
Having good credit is often a necessary prerequisite to obtaining financing, especially when trying to start a new business.
So while it may not seem like something that you need immediately, if you want to get financing for your business in the future, it’s best to develop and maintain a good business credit score now.
The hard part about having a bad credit score is making sure that you don’t let the mistakes of the past affect your ability to move forward in the future. This means avoiding things like late payments, returned checks and defaults on loans or accounts.
If you do these three things, there should be no issue in getting started with your business ideas.