If you have a business, you need business credit. Whether you need money to expand your business or cover expenses, it’s important to have access to funds when you need them. Access to money when you need it for your business can be the difference between talking about your dream and living it. Business credit can be invaluable when it comes to growing your business.
Photo by Pylyp Sukhenko on Unsplash
What is Business Credit?
Business credit is money extended to a business to allow it access to funds. This could include money for startup, equipment, marketing, inventory, payroll, etc. When you have business credit, you can:
Start building a business credit history;
Handle emergencies;
Deal with cashflow problems;
Use less of your personal money.
Business Credit vs. Personal Credit
Most entrepreneurs tap into their own funds and use their personal credit to borrow money for their business. But your business can have its own, separate credit history.
Just as your personal credit history is reported to the three major credit bureaus, Equifax, Experian and TransUnion; business credit is also reported accordingly. Business credit is managed by Dun & Bradstreet (B&D), Equifax and Experian. For the latter two, the databases are separate for personal and business. Vendors you do business with can report the payment history you have with them, to the business credit bureaus, which creates business credit reports. There are also business credit scores, as with your personal credit score. There’s FICO Small Business Scoring, which ranges from 0 to 300 for business, unlike personal credit scores that range from 300 to 850.
How Business Credit Can Help Your Business
Once you’ve established business credit, it can help your business:
Obtain more favorable business loans and lines of credit
Get lower rates for business insurance
Receive longer terms from vendors and suppliers
Qualify for government and corporate contracts
Raise money from investors
Overall, good business credit can really help you to save money, smooth your cash flow and grow your business.
If you’re interested in learning more about business credit or seeing how you can qualify for some, click here.