Business Credit Basics
If you’re familiar with credit and credit scores in general, you’ll easily get an understanding of business credit.
The idea behind business credit is that lenders, suppliers, and partners don’t know whether or not you’re likely to pay them. Looking at your business credit helps them decide if they should take a risk on you. With strong business credit, you borrow at lower costs, and you may get more favorable terms from suppliers. You may also be able to get loans without a personal guarantee.
Why Business Credit?
You can already get loans with your personal credit, so why bother with business credit? It’s best to keep business and personal matters separate for a variety of reasons. If things go sour with personal finances, your business may suffer (and it works the other way around too). In addition, business borrowers are different from personal borrowers, so business credit is scored differently. For more details, see:
Establishing Business Credit
Just like personal credit, you have to build business credit. The steps are similar: borrow money, repay responsibly, and make sure your payments are reported to business credit reporting companies. You may also want to supply information to these companies to enhance your business credit report. The more they know about your company, the more others get to know your company (and get comfortable with it).
