Things to do to get small business credit
Few businesses can survive very long without using some form of business credit. The market has expanded at such a rate that using a cash only system, to run your small business, is no longer possible. This means that most small business owners will need to obtain business credit, at some point. Most small business owners find that they need credit, for purchasing, running the day to day demands of their business, and taking care of other business function. In addition, one of the major advantages of using business credit is that it allows you to keep very detailed records about where your money is being spent. Establishing business credit is also important to establishing a credit history, which will be a factor when the business is seeking additional financing. Without a business credit history, small business owners may find it nearly impossible, to get a lender to grant a business loan. So if you are ready to begin, here are things to do to get small business credit-
- Make sure that your business is a legal entity-This is an important first step when you are trying to set up business credit. The reason for this is that when you form your business as a legal entity, it will separate its credit, from your personal credit. This will be the beginning of your business getting its own credit record, and credit profile.
- Make sure that your register your business-Another important step in establishing business credit, is registering your business. Many small business owners overlook this important step. You need to register your business, with the appropriate business credit bureaus. Once you do that you will be able to begin documenting a credit history, for your small business.
- Make sure that you are aware of the requirements-You need to be positively sure of all the requirements of the credit market, as it applies to businesses. It is important to understand that if your small business does not comply with the requirements that are set out by the business credit market, it can seriously damage your business credit. The business credit bureaus will then red flag your business credit history, and lenders will in turn be reluctant to extend credit or a loan to you. This can negatively affect your small business finances, for a long time.
- Make sure you have a well written business plan-One of the most important tools in helping you to establish business credit, will be your business plan. As part of your business plan, you will need to have a financial statements section that will show that your small business is financially healthy. It is a misconception to think that you will not need a business plan. The majority of lenders will require you to have a complete business plan, before they will even consider lending you any funds. Keep in mind that if your business is new, and does not yet have a business credit history, a well written business plan, can help to make up for that. There are many lenders who will consider lending you money, for your small business, if you can convince them you are good risk, through your business plan.
- Make sure that you take care of your business credit-Once you have obtained business credit, you need to take care of it. Just like your personal finances, you need to make sure that you pay all of your bills on time. You want to maintain and constantly be improving your business credit rating. You want to pay all bills on time and if possible in full. Carrying large amounts of business credit only poses a liability, for your small business.