3 reasons why business credit is important
If you’ve ever applied for a car loan or a credit card, you’re probably familiar with personal credit. This score shows banks and other lenders how reliable you are with your personal finances and how likely you are to pay bills on time. As a business owner, you should also learn about business credit, which shows how well you are able to repay your business debts on time.
Business credit shows lenders, suppliers, and other vendors how financially risky your business is. This score helps them assess whether your business should receive financial credit. If you apply for small business financing from lenders or trade credit from suppliers, they will often look at your business credit score before working with you. Because of this, building your business credit can help you set your business up for success. Below are 3 key reasons why business credit is important.
Why is business credit important?
Having good business credit helps you in 3 ways:
1. You can obtain business financing quicker and easier
Having good business credit is helpful when you’re applying for business loans to quickly solve cash flow problems. Lenders may look at your business credit score when you apply for financing from them. Having a high business credit score will improve your chances of getting approved for small business loans, business lines of credit, or other business financing products.
A high business credit score will demonstrate to your lender that you will make repayments on time, which will help you get qualified quicker and easier. Depending on the lender, you may also qualify for lower interest rates on financing you apply for if your business credit score is strong enough.
2. You can get better credit and repayment terms with suppliers
Your business credit score isn’t just helpful when you’re working with banks and lenders. A strong business credit score can also help you get trade credit and secure better repayment terms with your vendors and suppliers. With a strong business credit score, they’ll view you as a trustworthy client and may provide you with more flexible repayment structures. This is beneficial when you need to buy equipment, stock up on inventory, or make other major purchases for your business. Selecting the right supplier for your business can also help you secure good repayment terms that align with your needs.
3. You can protect your personal credit score
Business credit is also important for protecting your personal credit. As a rule of thumb, you should avoid using personal credit for business expenses and purchases. Incurring large business expenses with your personal credit will increase your credit utilization ratio, which measures how much credit you are using in relation to your credit limit. High credit utilization has a negative impact on your personal credit score.
How do I start building my business credit? https://bit.ly/3OU2yxq Now that you know why business credit is important, it’s time to start building your business credit. If you’re looking for ways to build up your business credit, our comprehensive how-to guide can help you get started. This guide will show you what factors impact your business credit score, what steps you can take to build your score, and how you can monitor your score. https://bit.ly/3LOC26o
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