Business Credit Article 5

Building Business Credit the Right Way

Business credit gives business owners access to sums of cash that many never thought were possible. It opens the door to an entirely new reality of business, perhaps by expanding your location or product lines, or opening new locations. Having access to cold, hard cash can turn dreams into paychecks. As a business owner, doesn’t this sound exciting? But have you taken the proper steps to start building your lines of business credit?

Corporate credit doesn’t come easy, but neither was building your business. There are many steps to take, and they must be taken in order. Some steps are harder than others, but in the end the reward far outweighs the effort. It is possible for business owners to secure $50,000, $100,000, even $250,000 in cash to make their business dreams come true.

One of the first steps to take is to stop paying for business expenses out of personal accounts. You must never again consider taking out a personal loan to float or improve your business. You must not “loan” money to yourself out of your personal or family’s savings, education or retirement accounts. These actions put you at high risk for personal economic hardships if your business should fail, as 95% do in the first five years according to the Small Business Administration.

Separating family from business can be a hard task, especially for “family businesses.” However, in this case the risks do not outweigh the rewards. Many business owners, and couples, often overlook a common, avoidable mistake that “contaminates” their credit profiles. Anytime a spouse is added to a line of credit, that spouse’s credit history now becomes part of your credit history. Therefore, if your spouse makes one late payment, that delinquency affects your credit file. This matter can be complicated much further if you have not taken the proper steps to separate your personal credit from your business credit, and it could prevent you from securing the financing needed to grow your business.

The road to financial business security through business credit can be a long road, requiring patience and attention to detail. The industry standard for building corporate credit to the point where you can secure cash loans without a personal guarantee is two to three years. If you work with a corporate credit specialist, that time can be reduced drastically. However, never rush the process by skipping steps! It will only ruin the work you have already done.

When building business credit, you must track your progress and know when to move on to the next step, and you must keep and close eye on your credit history reports. You must be willing and able to contest any credit inaccuracies in a timely manner or risk damaging your credit file.

On a final note, there is another mistake business owners make after they begin securing large lines of cash credit, and this mistake can be quite costly—the mistake is to overspend their cash, being lured by temptation instead of leveraging their money for greater business gains. Don’t undo your good deeds by the freedom and responsibilities of managing large sums of money. Making the right investments with your new, hard-earned monry will pave the way to a lucrative lifestyle down the road.

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