How to Build Small Business CreditPosted by Factor Funding Co. on November 16, 2012
Small business owners routinely face cash flow problems, especially during their first year or two of operation. The biggest issue for many of these entrepreneurs is qualifying for credit that will help them make it through the lean times. The good news, though, is that there are several types of small business credit that are available specifically for these company owners. However, before you go out and apply, it's important that you find out all you can about how these credit arrangements work. Here is a short primer on small business credit.
Establishing Credit for Your Small Business
No matter how valuable a credit option may be, it won't do you any good if you don't meet the qualification criteria. To get approved for small business credit, you'll have to work at establishing credit ahead of time. The first and easiest way to build credit is to pay all of your company expenses on time. Establishing a good payment record with your service and utility providers is a stepping stone to getting credit from other sources.
Choosing the Best Kind of Credit for Your
After you're able to apply for your first type of business credit, you should spend plenty of time researching which arrangement is best for your situation. You can choose from several kinds of credit, including business credit cards, bank-issued business loans, and lines of credit from suppliers or wholesalers. The first type of credit you select should be based on your immediate and long-term business financial needs. For example, a bank loan may be a good idea if you intend to make ongoing purchases to grow your company or expand your reach into the market. You might find a business credit card to be a wise choice if you're trying to establish a separate credit history for your company.
How Small Business Credit Can Benefit Your Company
Why do you need to establish small business credit? The most obvious reason is that having access to credit makes it easier for you to make necessary purchases without having to wait for the cash to pay for them. However, small business credit also makes it easier for you to keep up with essential bookkeeping. For example, if you use a business credit card to make all of your company purchases, you can simply request a year-end statement from your credit card company, which can help you to prepare your business tax return easily.
Establishing and receiving small business credit takes time, but it's worth the effort to build a good credit history. By following the advice in this primer on small business credit, you'll make it easier to handle the inevitable cash issues that arise during the course of business.