Business credit is becoming more and more important in the current lending environment. In fact, in the first half of 2013, more than 45 million business credit reports were pulled by lenders from Dun & Bradstreet and more than 35 million from Equifax Commercial, according to Creditera, a business and personal credit reporting company. This means that lenders are relying more and more on using business lines of credit to determine the creditworthiness of small business borrowers. Furthermore, one of the most popular funding programs for small businesses in the U.S., (the SBA 7(a) Loan Program) is now relying on both business and personal credit data (aka your LiquidCredit Score) to determine eligibility for small business loan approval. The LiquidCredit score is gaining in significance in the business lending arena and in the near future companies like Creditera will offer business owners the option to review their LiquidCredit scores to stay abreast of the changes in their business and personal credit history. That alone is reason enough to build business credit as soon as you start your business. A few other good reasons include:
Separation from Your Personal Credit – Building your business credit history is critical if you want to separate your personal credit from your business credit. It’s unwise to use personal financing such as personal credit cards to fund your business purchases because your credit card usage will report to your personal credit history, potentially hurting your personal credit score. It’s always best to use business credit cards or lines of credit instead of personal because (depending on the lender), your business credit card usage will not report to your personal credit as long as you are properly maintaining it (and in some cases it will also help you build business credit, depending on the lender).
Qualify for More Business Funding Options – Building your business credit will help you qualify for more funding options. According to the Small Business Access to Capital Survey conducted by the National Small Business Association, 20% of small business owners were denied small business loans due to their lack of business credit. This is further proof that building business credit is essential if you want to acquire any type of debt financing for your small business. You hurt your chances of getting the funding you deserve when you lack a business credit history.
Turn Your Business Into Easily Sellable Asset – A good business credit history could be an attractive feature for potential buyers of your business once you are ready to sell. Buyers may feel that the business is secure and stable due to its ability to handle its business debts. A good business credit history along with good financial statements and projections could be an easy sell to any business buyer with good business sense.
Building a business credit history can start with something small such as obtaining a store credit card from places like Quill, Uline, Office Max, or Office Depot. Most of these places will not require you to provide a personal guarantee to be approved and they will report your credit card usage to the business credit bureaus such as Dun & Bradstreet, Experian Business, and Equifax Commercial. No matter how small you start just be sure to start right away. Don’t let your potential small business loan slip through the cracks just because you don’t have a business credit history.
Brittni Abiolu is the Owner & Publisher of www.CapitaLinker.com. Through her website, she serves to educate entrepreneurs and small business owners on how to increase their chances of obtaining capital in the simplest way possible and how to find and connect with the most appropriate funding sources. You can connect with Brittni on Linkedin, Google+, Twitter, Facebook, and Pintrest.
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