Why Do You Need Corporate Credit When Dealing With Banks
All businesses exist to make money to keep the business running and to make a profit for the owners. Many people view banks as a place to store money and to get loans and donít realize that they are a business and therefore only exist so that they can make money. This leads many small business owners
to wonder why they need business credit when theyíre trying to work with banks. Well without any type of credit history for your business they donít view your company as an investment that can make money. Therefore they donít want to risk lending you money as they wonít have a good return rate.
If youíre new to owning a business then you may not realized that they changed the business credit system back in 1995. Now all businesses have a business credit score and a business credit report just as you have one for yourself. Also, just like personal credit, the better your score the more likely you will be to get a business loan or a line of credit. Thus you will need to have some type of corporate credit for your business. Itís important to start building credit for your business early on after you have opened up your business.
Itís important that you keep your business and personal finances separate. However in some cases you may not be able to. Many banks are reluctant to lend money out to any person or company that has no credit history. If your business has no credit history then you may have to use your personal credit
history as leverage for you to start to get corporate credit. This will allow you to start building a business credit report and a business credit score. You need to remember that theyíre risking not getting their money back every time they loan out money, if you have no collateral then itís obvious why they are
reluctant to lend you money.
As with the personal credit system, banks will look at your business credit score when you put in an application for a credit line. To help you increase your chances of getting a line of credit with the bank you can open more services with them. You may already have a checking account with them however you may not have a savings account or credit card. Since both of these services make the bank more money you will be considered more carefully if you have these accounts as well.
Another type of profit for a bank is the bill pay service they offer. While this may be a small fee for you every month it will also increase your chances of getting a business loan.
Ultimately your relationship to the bank will have an effect on your ability to get credit with them. The better your companyís standing is with the bank and the more services that you have with them, the more likely you will be able to get the credit you are looking for.