Having a good record on business credit is obviously an asset not just for the owner or stakeholders or in times when you the decision to upgrade operation is on its way in which you will look for additional funds.
But before that time reaches on you in the future, now is the perfect time for you to start getting and building the account for the benefit of your future.
- The questions are how to get people’s money?
- And how good are you in doing it?
A successful business has high convincing power and this is fact, of course you are going to persuade different types of individual whether a client, investors, lender and even a vendor for them to give their hard earned money. Those types of people are the lifeblood of every business in the market arena.
According to the latest data we received from Federal Bank of United States St. Louis, by end of third quarter in 2016, business debts in United States will hit up on a record breaking high of $8 trillion and still growing.
And it seems that you are puzzled about it, what we mean here is that, as business owners and managers, remember that those trillions of funds in dollars are lent to all business owners around United States. Take note, getting a loan for business is not that easy to consider.
Loans in business have to pay higher rates in terms of interest and should agree on the strict conditions for them to properly run the business at the standard procedures while owners have their outstanding loans.
This is the reason why small scale business owners prepare the needed requirements before applying in order for them to minimize the percentage of denied application.
We have here our simple four friendly ideas that clearly represents of what should be done as business owners for you to establish a good business credit. The ideas that we will be sharing might take time, so starting it now will be a great advantage.
Idea #01: Own an Asset first [Getting your house]
You might be puzzled why are we suggesting this?
Instead of going directly to the business that you want to start, here’s the point. If your small business does not have any credit profile as to this moment, the higher chances or in most cases, lending decisions will tie up with your own credit.
Even though you have established your credit for business, your own credit plays an important role in the decision making of the lenders to grant your request, this is a must for them to make sure that your credit record in person is up to date and of good record .
You need to consider reviewing your own credit, with this if you have existing personal debt, the best thing to do now is to clear it out or pay it on time.
And also if you have credit card, you use them on your activities and update it frequently, this will also reflect on your credit background as one of the basis for them to accept your loan proposal or any related transactions with your business operations.
Idea #02: Step 2: Execute Your Business Cleanup
If you want to separate personal credit to your business credit record, then the best thing to do is to legally separate them. Your business should be established as Corporation, with Limited Liability of the Company or any other entity.
Remember that “Sole Proprietorship and Partnership” by its definition is different from the owners itself and in this case cannot have separate record in credit.
In small business you need to obtain an Employer Number or any related Employer number that is issued by your Government agencies.
This means that you have to create a bank account in the name of the company, and all the funds should never commingled with your personal one.
Both in practice and theory, the small business you have should still remain distinct for you to meet certain imposed requirements.
Idea #03: Ask Help for your Suppliers
For your information, your business supplier plays a critical role for you to establish and even improve your credit score. So starting now, you can start asking them to provide provisions in terms of credit for future business transactions.
So as your small business pays the invoices on timely basis, you can ask partnered vendors to report those data of timely payments to lending organizations in timely basis so that your small business will be given credit.
So the time you pay your invoices on time and consistently, you may want your business supplier to increase their credit limits that they have provided on you.
With the record of growth and by showing it over time, this also show that the business trust with you and the partnered establishment increases your rate as they can see it on the chart and this will also increase your credit, specifically if you are working with the capital.
Idea #04: Apply for a credit when you don’t actually need it
The idea might be confusing because in most of the time, business owners apply for business credits when they need it.
Chances are that lenders might approve or disapprove the request if the documents that business owners submitted fail during the assessment.
When you apply for business credit, lenders will evaluate the company as a whole, meaning they will check the company’s capacity to pay a loan without any delay.
Any business experiencing shortage in cash flow or those who pay huge expenses does not represent good points. In this case they need financing due to mismanagement of business operation.
In this case since we aim to build a business credit, consider doing it when your small business has no difficulties or when the company is having a good year and you can do things without the help of the financing institution that will provide you with the need additional funds for the business operation.