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A Guide To Business Credit: How To Get It and Keep It



In today’s economy, businesses need all the help they can get. Fortunately, there are a number of options out there to help small businesses get started and keep growing. Chief among these is business credit, which can make an enormous difference in your company’s growth potential. Whether you’re just starting out or looking to expand your business, getting the right type of credit can be a game-changer for your company. Business credit offers a variety of advantages that aren’t available with personal credit alone. Understanding what each type of business credit is, how it works, and where to find it will give you an edge when planning for the future success of your business.


What is Business Credit?


Business credit is one of the key components of a company’s credit, along with equity and assets. Business credit is money that’s extended to your business by lenders such as banks and credit unions. It can be factored (loans taken against future sales), term loans (fixed interest rates), and lines of credit.


Business credit is important because it lets your company purchase things now, even if you don’t have the cash on hand to pay for them.


Business credit lets you buy inventory, fund growth, and make capital improvements to your property. It also lets you hire employees and pay them, with the understanding that you’ll pay back the money at the end of the month.


Types of Business Credit


Business credit can be broken down into two types: Acquisition Credit and Asset-Backed Credit.


Acquisition Credit is used for funding short-term needs and is usually unsecured. This type of credit is often given to small companies that don’t qualify for long-term business credit.


Asset-backed Credit is backed by an asset or a promise to repay a debt. It’s usually given to larger companies that can demonstrate the ability to pay the loan back. This type of credit is often secured by something like equipment or real estate. You’re basically putting the item up as collateral while you use the credit.


Why is Business Credit Important?


Getting access to business credit can help you get inventory and supplies when you need them and pay for them over time. This can allow you to expand your business without taking on a lot of debt.


Business credit is also important for the sake of your personal credit. One of the factors that determine your credit score is your business credit report. If you don’t have any business credit, you’ll have a harder time getting a mortgage or a car loan on your own. If you have a business credit report, you can show creditors that you’re good for your obligations and get a better interest rate on your loans.


How to Build Your Own Credit


Start small. If you just started a business, it’s likely that you don’t have much in the way of assets or equity. The good news is that you have plenty of time to acquire business credit and build it up. If you have a successful business plan, there are a few things you can do to get yourself started.


Apply for a business credit card. These are often easier to get than a regular credit card, so they can be a great way to get started. If you have partners, get one credit card in each partner’s name. This will allow you to use their credit to help establish your own credit profile. If you don’t have partners, try to get a credit card with an introductory 0% interest rate. Paying off the balance as quickly as you can is the best way to establish good credit.


How to Repair Your Own Credit (and When to Bail)


If you have high-interest debt, get rid of it as soon as possible. This can seriously hinder your ability to build business credit, as it’s one of the main factors considered when determining your credit score.


If you have a lot of debt, you may want to knock it out before taking on business credit. This will allow you to establish your business credit profile as quickly as possible.

If you have defaults on your credit report, you’ll want to eliminate those as soon as possible. You can dispute the information and have it removed from your credit report as you work towards paying back the missing debt.


If a creditor has sued you for nonpayment, you need to bail. If a creditor sues you for nonpayment and wins, they can take your assets and put a lien on your property. This can make it very difficult to build business credit.


Bottom line


Business credit is a powerful tool that can help you grow your business. It’s not always easy to get, but it’s worth the effort. In order to get the best terms, you’ll need to establish your credit rating and make sure it’s accurate. Your credit report is easy to overlook, but it’s an important factor in whether you get the financing you need. By following these tips and beginning to build your business credit, you’ll be one step closer to growth and success.

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