How To Build Business Credit

Here are reasons why you must build business credit.

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New businesses need to build credit because good credit scores make it easier to obtain financing and may qualify them for better terms from vendors.

Regardless of your business’s legal structure, building credit starts with getting your business properly established and opening bank, credit card, and vendor accounts.

Paying your bills on time is critical to building and maintaining good business credit.

Here are five benefits of having good business credit:

1. Financing is cheaper.

Having a good business credit score allows you to not only qualify for loans and other financing but also get lower interest rates on those loans.

This means the price for borrowing is lower, which, in turn, saves your business money. Especially for loans from conventional banks, having a good business credit score can be one of the most important aspects of obtaining a loan with favorable rates and terms.

2. Vendors may not require prepayment.

With certain B2B products and services, you may need to prepay. If you have a solid business credit score, these vendors and service providers may not require you to put any money down to get started.

That means you can better manage your business’s cash flow when establishing services. While this may seem like a small advantage, this kind of perk can have a major financial impact on your business’s operations.

3. Suppliers and lenders may agree to better terms.

Your credit score can act as a bargaining chip when it comes time to negotiate deals with vendors and suppliers. If you have a good credit score, you may be able to talk down prices, extend contract lengths or, if you’re seeking financing, lower your interest rate.

4. It facilitates the separation of personal and business finances.

One overlooked benefit of understanding your business credit score is the ability to divide your personal and business finances. Small business owners often invest a lot of their personal assets and savings into their business. In many cases, this is the nature of building a small business.

Part of building your business, however, is slowly separating your personal financial commitments from your business financial commitments.

By establishing a business credit score, you’re taking one of the most important initial steps in doing this.

Especially in a business world where most lenders require their borrowers to sign personal guarantees, having a business credit score can be essential to limiting your personal exposure to business-related ventures.

5. Your business will be financially stable.

Long-term success in business means building on a conservative financial basis and taking risks when a new expansion is necessary. To achieve and maintain a good credit score, you need to develop certain financial habits.

That means you’ll be saving money, planning your financial future, and creating a stable and sustainable company.

Having and maintaining a good business credit score means building a successful, long-term company.

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