Three out of five businesses fail during the first five years according to the Small Business Administration and Dun & Bradstreet. Whether you’ve just started a business, or have been in business for some time, experts agree that developing a business credit profile and separating your personal from business credit can help you beat the odds.
One of the biggest advantages of creating a good corporate credit profile is saving money. By obtaining a favorable credit score, business owners can actually lower the interest they pay on loans and leases. As a result of freeing up liquid capital, business owners can also take advantage of prepayment discounts with vendors, add employees, and build up inventory.
According to Bonnie Simon, Director of Sales for Corporate Credibility, “A downside of utilizing personal credit for a business is that your personal credit can become tied up and even negatively affected. For example, a landscaper I spoke with recently received a government contract. Since he had no corporate credit, although he had just incorporated, he had to utilize his personal credit to purchase three new trucks for the business. When he applied for a mortgage for his new home, much to his dismay, he discovered that he could not get the interest rate he had originally qualified for because the three new trucks were now on his personal credit report.
“Another issue to consider is let’s say, your business goes out of business. Without corporate credit, you would still be legally and personally responsible for any business expenditures even after the company goes belly up,” she explains.
There are companies such as Corporate Credibility that specialize in assisting new corporations in establishing corporate credit and can even short cut the credit building process from the average 3-5 year time span to 6-9 months. Business expenditures can be purchased via this credit building process and lenders and funders report to Dun & Bradstreet (an important step in building a corporate credit profile).
Do you know the answers to these important questions?
Ã¢Â?Â¢ What rights does a business owner have if there is incorrect information on their credit report?
Ã¢Â?Â¢ How do I obtain a business credit score?
Ã¢Â?Â¢ What do business lenders look at in order to extend business credit?
Ã¢Â?Â¢ Where can I find companies that grant credit?
Ã¢Â?Â¢ Which companies report to the business credit bureaus?
Ã¢Â?Â¢ What credit card companies do not require personal guarantees?