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It is typical for the owners to use personal assets and credit to finance operations while income is low or the business is just getting started. Overly relying on their own finances and merging their personal and business assets and credit are regular mistakes made by business owners.

As their firm grows and makes profits, owners should work to establish and enhance their business credit so they have more options when applying for appropriate business loans and lines of credit. If you build company credit, you will have more funding options available without a personal guarantee.

Despite the growth of knowledge, many small businesses still give business credit little consideration.

There are a number of reasons why business owners choose to ignore their company scores and instead depend on their personal credit scores.

  1. Many people are still puzzled by the idea that business credit is reported separately from personal credit.

  2. Due to a lack of knowledge, business owners could think that the establishment of personal and business credit is similar. Some business owners don't realize the importance of corporate credit until after they've asked a vendor for a loan or credit line and either been denied or granted one with excessive fees.

  3. Nearsightedness: You definitely don't want to think about growing and establishing business credit because it requires time and effort. It might be simpler for a business in a bind to get a loan with a personal guarantee.

  4. Some businesses with business credit find it challenging to get accepted based only on their financials/receivables or tenure in operation.

Combined personal and business finances

Offering a personal guarantee is OK, but having outstanding personal and business credit can help you achieve rates that are fair. Be cautious when offering a personal guarantee because, if you default on the loan and damage is done to your personal credit as a result of company concerns, it could lead to the refusal of personal financing such as a mortgage or auto loan.

For several types of finance, one may sign their name individually as the firm principal. Others won't show up on credit reports until a payment default occurs, while some will have a big impact on personal credit ratings and personal loan approvals.

Uncertainty can work against you!

Most lending and company credit is unregulated. Because business creditors, creditors, suppliers, and credit bureaus are not required by law to disclose how your business credit is used or regarded, those who are impacted by it are not provided much information or training on this.

What should a company do as a result to make the best possible initial and enduring impression?

  • Examine each important business bureau (with links), as they are the most common ones that can be examined.

  • Find out which credit bureaus are utilized by the factoring company, lenders, vendors, or anybody else offering you credit. In addition to the big three, there are several smaller bureaus.

  • Find out how to get a copy of your business credit from the bureau, if it is being used and if it is different from the big agencies.

We would be happy to give you a free credit consultation and offer you advice on how to show your business in the best possible light and take advantage of the benefits that good business credit can present if you need help or would want us to clarify the reports to you.

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