When a person starts a new business venture, whether it is a small or medium sized business or if he or she wants to go big time, the only way that they will put these businesses dreams into fruition is if they have enough capital. That means, most likely everything will go smoothly if they have enough money to begin with. But if you do not have a trust fund or savings to begin with, it will be a big challenge for you to get capital from lending companies, creditors or banks.
This article is not here to help you get the initial capital. The point of the first paragraph was to make you realize how important a business credit is. Without it, those lending institutions will never give you the time of the day.
So let us say you were able to get initial capital and your business has been operating successfully for about a year now. It is still considered fairly new. Now you are planning to expand your business, but you do not know where to start. At this point, it will still be challenging to get lending institutions to trust you enough to lend you money. Not unless you started building your business credit early. Here are some tips of the trade to build business credit.
There’s a lot of fish in the sea. And when we say fish, we mean people and companies who can give you credit and help build your business credit. Remember, one of the ways to build your business credit is to get credit and pay them according to the terms (this means paying on time and with the right amount). Banks are not the only way you can get credit. You can try securing investors or looking for lenders who are asset based (also called collateral based) and not credit worthiness based. You can even look for online resources, which have started to become popular nowadays, like websites for crowd funding or peer-to-peer lending. The more options you have, the better your chances are at kick starting your company’s business credit.
If you run out of options, dip into your personal credit. This should be your last resort. The thing is, it is not advisable for business owners to use their personal credit for business transactions. They should almost always be kept separated. Almost. If there is no other way, apply for credit through a bank and there is a chance you will get approved, especially if your personal credit score is at least around the middle 600’s. Remember that if you do get approved, most likely your credit score is going to go down because your personal credit and business credit will be considered as one at this point. To boost your personal credit again, make sure that you will start building your business credit and then pay all your debts on time, keep the ratio of your available credit and debts within the lower range and monitor profusely that your balances do not exceed a third of your credit limits.