Whether you’re starting a new business or running an existing business, you need to build separate business credit so you can get small loans when you need them. Having a separate business credit profile helps limit your personal liability and protect your personal assets.
Most people use their available limits on their cards and savings at their bank to start their business. When they take out loans in their personal name, they not only have to provide personal collateral for the loans, but they also use all available personal limits on their cards and reduce their personal score in the process of starting their new business.
You may be running a company for years, but your company may not have a construction paydex score at all, and every time you apply for a loan, you must give a personal guarantee. Today, most lenders look at a corporate credit score before approving any business loan.
Most business reporting companies have established a scoring system that is used by banks and many lending institutions to approve or deny a business loan. Agencies such as Experian, Equifax, and Dun and Bradstreet have developed a rating system that is used by banks, lenders, consumers, and other businesses to determine a particular company’s rating.
How to build corporate credit is a step-by-step process. You need to have the correct corporate structure. The sole proprietorship will not be able to build business credit. The business owner must understand the difference between business and business credit. How and where to obtain commercial lines is a very important element in the creation of corporate credit. Once you’ve established a strong corporate credit rating for your business, you’ll increase your chances of getting loans.
If you have a bad Fico score, you can learn how to build corporate credit without using your personal credit. Personal and commercial credits are created in totally different databases from the offices, they are not linked to each other. For the best result, you should have strong corporate and personal credit. If your personal Fico score is low, you can start to fix it while you build your business credit score.
As a smart business owner, you need to establish separate corporate credit. Instead of applying for loans in your personal name, start applying for loans in your business name.