Apply for Business Credit: Advice for Business Owners
May 17, 2016
As an individual who can benefit from some financial flexibility, you probably have some personal credit. But what about as a small business owner? Do you need business credit? While you might be able to start a business just on personal funds and loans from friends, eventually you will want to apply for business credit for a number of reasons.
Reasons to Apply for Business Credit: Growth
Sure, you might have enough money in your personal account to get started in your business, but what if you get more orders than you have inventory? If you need to fill your stockroom fast, you’ll need money to pay for those extra goods. And what about when you’re ready to expand? Finding new space, advertising and buying more equipment costs money, and even if you’re doing well right now, you might not have quite enough in the coffers to cover all those costs. Furthermore, it’s a good idea to have a little extra capital available in case of unforeseen circumstances, be it an unanticipated setback or an unexpected opportunity.
Reasons to Apply for Business Credit: Favorable Terms
Perhaps you took out a second mortgage on your home to start your business, or used credit cards to get going. A line of business credit can pay those off and potentially get you more favorable rates, taking less pressure off your personal finances and creating payments that you can easily make every month. It’s usually a good idea to keep your personal and business finances separate anyway. If you’ve borrowed from friends or family to get your business started, this may be a good time to pay off those debts and create a clear separation between your personal and business relationships.
Reasons to Apply for Business Credit: Reputation
In the business world, having a credit picture puts you on the map. When potential business lenders and other companies in your market space want to know about you, the first thing many of them are likely to do is pull up your business credit profile. If you don’t have one, those companies are likely to look elsewhere, towards a known quantity. Counter to what may seem intuitive, even having average credit is better than having no credit. However, if you are in a position where you don’t know if you need credit right now, there is no reason why you can’t have great credit. Simply apply for business credit, then make your credit payments every month, and your behavior will be reflected favorably on your business credit report. In fact, if you are in a good position financially right now, you can even make your payments before they are due and find yourself in the top portion of business credit ratings. This way, not only will other companies want to do business with you, but when you find yourself facing a major expansion and in need of a large business loan, you should have no trouble getting it, and at terms that will work for you.