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What business managers should know about business credit

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One of the integral parts of managing your business has to do with the amount of credit that you extend, use, and most importantly how you manage it. Anyone who is in a business management position you learn everything they can about business credit. Business credit has now becomes a vital part of most businesses since it has become almost impossible for any business to survive without it. Business owners and managers also need to be aware of the differences between personal and business credit. Business finance experts recommend that any business manager keep his personal and business credit separate. The bottom line is that mixing personal and business credit is never a good idea and it can have serious ramifications for your business. There are numerous other factors concerning business credit that should be taken into consideration by anyone in business management. Here is what business managers should know about business credit-

• Know your business credit rating-It is important to understand that you are risking potential damage to your business credit rating if you use your personal credit to finance your business. Not only can you end up ruining your personal credit rating you are depriving your business of the ability to establish credit. Keep in mind that you will need to have both a great personal and business credit rating when you seek out additional financing for your business. You should not expect that your potential lender will only look at your business credit. In addition, it is crucial to understand that if you are using personal credit to finance your business and your business fails you will still be responsible for paying off the debt you have incurred. Finally, it is important to understand that by establishing a business credit rating you are protecting your personal assets.
• Know the connection between business credit and business financing-There is much more to business credit then just the rating that you get. Most businesses find that at some time they need to seek out financing for additional working capital. Either a potential lender or potential investor will want to know how you have handled the business credit that you have been given. The bottom line is that your business credit rating shows how responsible you are in terms of paying your loans and managing your cash flow. This is one of the few ways that you can show potential lenders and investors that your business is a good risk. When you can show a great business credit rating you are far more likely to get the money that you are looking for. Keep in mind though that any potential lender or investor will be looking at not just how much debt you have, but if you pay it back on time and manage it wisely.
• Know that business credit legitimizes your business-Business owners often overlook the fact that having business credit makes your business look more legitimate rather then just a hobby business. In addition, to establishing business credit you should also take the time to check with your business finance professional to determine what the appropriate business structure is for your business. Keep in mind that the business structure that you choose can have an impact on the type and amount of business credit that you obtain. While this can seem like an unnecessary and time consuming process this helps to make your business look much more credible.
• Know how to use your business credit-One of the things that remains the same between personal and business credit is how you use it. You should never charge up more then 35% of your credit, always pay your bills on time, and do not borrow from one credit card to pay off another.

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