Increasing Your Business’s Worth By Establishing Business Credit

by Aaron Scott Young

Establishing Business Credit

Business Credit is what makes up the financial foundation of a company, and is mandatory piece of running a successful business. Many startup businesses, and even fortune 500 companies, rely on the personal assets and credit to secure funding or credit for the business. This is a mistake and an incorrect way to start and run a business. The ability to establish credit is an important component to the long-term success of your business. Access to credit can help you weather business downturns as well as provide you with the necessary funds to help your business grow. Operating capital may be scarce in the early stages of starting a new business, but the owner’s goals of becoming profitable and successful should also be to have a creditworthy business. Establishing a proper credit profile for the business separate from the credit history of the corporation’s shareholders, directors, and officers can be a powerful tool for obtaining different types of financing or working capital.

If you would like to learn more about building business credit, make sure you DO NOT MISS this next webinar… INCREASING YOUR BUSINESS’S WORTH BY ESTABLISHING BUSINESS CREDIT

Ask yourself these questions:

  • Can your obtain a loan for the business without your personal credit or personal guarantee?
  • Is your personal credit score good enough to achieve a loan or line of credit for your business?
  • Does your business have its own credit score… usually referred to as a Paydex or Itelliscore?

Establishing business credit with the Dun & Bradstreet, a National business credit bureau, creates an asset that can be used to acquire lines or credit, loans, or financing based on the business’s creditworthiness rather the owners. Business credit scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. There are many benefits of building business credit, like large credit capacity. Your business will have a 100 times greater capacity for funding compared to personal credit, and will not have to use personal credit to obtain financing. Building business credit increases the company’s value. If in the future, the owner decides to sell the company, having established lines of credit and trade credit will play a major roll and make it more valuable.

Business credit also helps protect the owner’s personal credit. It will allow the owner to be able to eliminate using personal credit cards and eliminate any chance of creating personal debt as well as co-mingling funds and putting up personal assets as collateral. It gives each business a unique advantage in the financial arena and banks will be able to easily check your financial statements both income and expenses to determine how much your business can afford. Often, this amount is higher than if you were trying to get a loan as an individual. Also, If you have a business credit card or line of credit, you can finance a purchase that you need to make for your business, usually at a fairly low interest rate. In fact, some business credit cards offer a zero percent interest rate for a certain time period.

It is imperative for a business owner to understand the importance of business credit, creditworthiness, and the role it plays in their business. It truly provides benefits and helps a business “stand on its own two feet.”  There are many business owners who think they don’t need it or will never use business credit because they have remarkable personal credit, but having business credit is so much more than just having a good credit score. Just like a company car, a trademark, or real estate, business credit is an asset. It increases the value of your entity. The greater the business credit, the greater the worth of your business.

If you would like to learn more about building business credit, make sure you DO NOT MISS this next webinar… INCREASING YOUR BUSINESS’S WORTH BY ESTABLISHING BUSINESS CREDIT