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What you need to know about business credit

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If you own a business, you will need to know everything you can about business credit. Few businesses can survive without some type of business credit. It is important to distinguish between business and personal credit. Some business owners make the mistake of thinking that they can use their personal credit, for business credit without any ramifications. While you may have accessed personal credit, to get your business up and running, continuing to use it to run your business, is never a good idea. It is important that you establish business credit, for your business. The wise use of business credit can be an important tool, in helping your business to grow. Here is what you need to know about business credit-

• Understand what a credit rating means-Business owners who are using their personal credit, to finance their business, are running the risk of ruining their personal credit rating. This is important because if you must seek additional financing, for your business, you need to be able to present both a stellar personal and business credit rating. You should also keep in mind that if you are using personal credit, to pay for your business, and your business fails, you will still be liable to pay for the expenses that you have incurred, even though they were for your failed business. Finally, the most important aspect to consider is that if you establish business credit, you are providing protection, for your personal assets.
• Understand that business credit plays a direct role in business financing-Business credit plays a direct role, in whether or not you can gain the business financing that you need. If you don’t have an established business credit report, lender may be hesitant to loan you the money you are seeking. If you can show lenders that you are responsible, with the credit that you have used, you are far more likely to be approved, for business financing. Keep in mind that your prospective lender will be looking at your business credit report to see how much debt you have, if you pay your bills on time and how long you have established business credit. They will consider all of these factors in determining if you are a good risk, for business financing. The bottom line is that without business credit, you may be unable to obtain needed financing, which can stall and even permanently damage the chances of your business growing and succeeding.
• Business credit helps to legitimize your business-Business credit will help to show that your business is a legitimate one. Once you have established your business credit, you should work with your financial professional to determine what business structure is the most beneficial for you. This person can also help you to separate both your business and personal finances. When you go about doing this type of structuring it makes your business much more credible.
• Use credit wisely-A note of caution is important here. Just like personal credit, business credit users should be frugal in the ways they use their credit. The same credit rules apply to business credit. You should try not to use more then 30% of your credit limit, pay off your balance each month, and most importantly make your payments on time.
• Consider business banking-Along with establishing business credit, you should have separate business banking as well. Your checking account will help you to keep your business expenses, separate from the personal, and establish more credibility, for your business. Keep in mind that your business account also helps you to establish a relationship with your bank that can lead to further opportunities, for credit and business financing. Once you are an established customer with a bank, they are much more likely to want to work with you in offering additional credit, financing and other financial guidance, for your business.

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