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Old 11th June 2012, 06:15 PM   #1
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Join Date: Apr 2012
Location: Southern California
Posts: 22

Default Why YOU Should Build Your Business Credit

Even though they’ve been in business for years, many people don’t realize that business credit even exists … what it is … and how to establish a business credit file. They may be wondering why, after so long in business already, should they begin building it now.

Here are a few questions those folks should ask themselves:

Have I ever been declined for a business loan or financing?
Could I use a business line of credit for working capital?
Do I need, now or in the foreseeable future, to lease equipment?
Am I currently stuck having to personally guarantee every loan?
Would I like to obtain easy, fast approvals on credit cards for my business?
Do I currently receive the most favorable credit terms from vendors?

There’s an unfortunate lack of useful information available on how to finance your business, especially when it comes to building business credit that will allow you to finance, operate and expand … without putting your personal finances, or your family’s very future, in jeopardy.

When you apply for credit for a business, most creditors will pull your business credit report. This credit might have been used for anything in your business … from credit cards … to loans … to equipment.

And what happens if they pull your business credit report and there’s nothing there? They’ll rely on your personal credit to guarantee your request. If there’s no business credit file, they’re not able to lend as much credit to your business. One of the main reasons you need a business credit report is the ability to receive more funding.

Here’s another reason that you need to build business credit: to save money! This is the most important reason. By building business credit you can save yourself and your business money.

Building a strong business credit rating is vitally important to your success. Without it, you’ll pay much more (in higher interest rates) for the money you borrow … if you can borrow at all. In fact, banks – which say they want to help small business owners – actually turn down over 97% of all business loan applications. They don’t make it easy!

Wells Fargo claims, “The longer you delay establishing business credit, the longer you delay taking advantage of business loans.”

How does this work? Here’s an example:

Let’s suppose that you need $50,000 for a piece of equipment for your business. Without a strong business credit rating, your bank will use your personal credit only. If you get approved, you’ll have in this example an interest rate of 18%. With a D&B report, you can lower your rate to perhaps 10% and you don’t have to guarantee the loan with your personal assets.

Here’s a quick comparison (sorry for the chart - best I could do on here):

---------------------------Personal Loan------Business Loan
----------------------------------------(with strong credit rating)
Least Amount--------------$50,000-----------$50,000
Interest Rate--------------18%---------------10%
Term of Lease-------------60 months---------60 months
Monthly Payment-----------$1,269.67---------$1,062.35
Total Payments------------$76,180.20---------$63,741.00
Total Savings------------------------------$12,439.20

By simply building business credit and setting up your business properly you can literally save yourself tens of thousands of dollars! When it comes to the bottom line, you have to be concerned as a business owner.

The truth is … you don’t really have a business credit rating until you start building one!

Last edited by TCCDepot; 12th June 2012 at 10:07 AM.
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