If you've just started a business, then you're probably looking for funding. You'll need a loan for your new equipment, real estate, property, and other starting materials. That means you're going to have to have a good credit score in order to get a good loan. Even after you get the initial loan, you'll want good new business credit in order to acquire corporate credit for your business, as well as any side loans you may have. Some investors will want to know your credit score, too, just to know whether they can trust you enough to invest in you. But how can you find a good loan with a completely blank line of new business credit? Can you really convince the bank that you're worth the risk, even though you don't have a credit history?
One thing to think about: look at the bank's point of view. If you're going to come looking for a loan, you'll want to know how the bank thinks, in order to help you secure a good loan with a low interest rate. A bank gives out its money with the expectation that it's going to get that money back, with interest. The reason so many banks are reluctant to lend to people with bad credit isn't because they're obsessed with getting it back with high interest rates - it's because they want to know that they're actually getting the money back. When someone with bad credit comes along, the bank will charge exorbitantly high interest rates - if they approve the loan at all - in exchange for the risk that the loan isn't ever going to be paid off. That means that your new business credit, while it doesn't do you any harm, isn't going to do anything to impress the bank.
So, if you're willing to lie at the mercy of the bank, you can try it. With new business credit, you're not really giving the bank any reason to trust you, which means they can essentially set the interest rates as high as they want. But if you're trying to negotiate for a lower interest rate, you might want to start establishing a line of new business credit now that will reflect well on your credit score.
One thing you can do in order to establish better business credit is make sure that your business credit is separated from your personal credit. By doing this, you'll keep any of your problems with your personal credit score from affecting your business credit history. If you've got great credit history with your personal account, that's great - you still might want to make your business a separate entity eventually, but you can use your personal credit to get the loans necessary. If you have bad personal credit, however, you should set up your business as a corporation right away, in order to make it a separate entity. That will allow your business to reflect only its own credit history, apart from your personal credit card account.
The next step is a business credit card. While your business might not be doing a lot right now, since you haven't yet found the money to really take off, chances are your business is doing something. Even if you're just doing a small backyard business, you're buying supplies from someone. By using a business card to purchase these supplies - and then paying off your credit card company immediately - you're establishing a trustworthy line of credit that can help you appear reliable to the bank. There are plenty of credit card companies out there that will work with your business as a separate entity, so that can be arranged. Just make sure that you use your business line of credit more wisely than your personal credit, and you'll be able to improve your credit history.
Corporate Credit Concepts specializes in "KEY PHRASE". For more information about "KEY PHRASE" and how it might benefit your business, please CLICK HERE for a free phone consultation.