Applying for a loan or line of credit with a bank requires a vast amount of financial verification.
Most small businesses these days are applying for non-traditional and alternative lines of credit.
There are even more options for business loans, but here are seven good reasons to build business credit in 2016.
Keep Your Personal and Business Finances Distinctly Separate
This is one of the most important steps you can take to protect your business and save time with bookkeeping.
Provided that you establish credit in the name of your business, there will be a clear difference between your personal and business finances in the eyes of the law.
You can be held responsible for company debts if the distinction between your business and personal expenses is unclear.
Protect Your Personal Credit Report
As you build business credit, keep in mind that there are many credit sources only reporting to your business credit report.
It’s essential to protect your personal credit report along with your businesses credit report.
Build a Credit Identity for Your Business
By creating an identity with major credit reporting agencies, your business will establish its own credit history, ratings, and scores.
When you have a credit-worthy company you will gain better access to lenders.
Protect and Improve Personal Credit Scores
Credit scores are a big deal.
The benefit for putting your business purchases on a business credit card is that your business credit card’s activity only reports on your business credit report, not your personal credit report.
This ensures that any balances on your business credit card do not affect your personal credit scores.
Limit Your Personal Liability for Business Debts
Building credit in your business’ name will ensure that you limit your personal liability for the business debts you are charging.
If you were to use personal credit for your business, creditors could hold you personally responsible for the debt.
Make Your Business More Attractive to Lenders
During the credit application and approval process, the account history that is being established will get added to your business’ credit report.
Your business’ credit will be evaluated as lenders determine whether or not your company is creditworthy.
Establish a Business Credit Asset
Establishing a business credit asset will ensure that small business owners are able to take action that will affect future growth.
This will help your business establish good management habits and obtain needed resources.
Building business credit is an extremely important aspect of running and maintaining a successful business.
Credit reports and scores play a key role in obtaining the necessary funding needed to operate your business.