When starting a business, it’s important to educate yourself with what business credits are and it’s a purpose for your business growth.
According to Nav, a business credit score company, 45 per cent of small business owners have no idea about the existence of a business credit score, while 72 per cent didn’t know where they can get access to further information. Lastly, a majority of the respondents didn’t know how to interpret their business credit scores.
Your business credit is the same as your personal credit, but it only focuses on the track record of your business financial responsibility. In other words, this is what companies, investors, or financial organizations to know if you’re eligible for a loan. They got to know if you’re able to pay first of all.
The bottom line is that it’s your responsibility to manage your business credit in order to have more options when you need to tap into funds bigger than what you have. And here are ways how:
Manage your Personal Credit
Small business owners often tap into their personal funds in order to start their own business. That’s why it’s great to maintain a rock-solid personal credit. The better your personal credit standing is, the more lenders will allow you for a loan.
Think of this as a resume into a financial organisation or lender, you need to introduce yourself and prove your capabilities of paying religiously. On the other hand, make sure to also improve your business credit once starting out in order to prove you can pay the loans when your business is open and you need funds.
Educate Yourself about Business Credit
Of course, the next step is understanding how business credit works as there are similarities and differences when compared with personal credit. Business credit uses PAYDEX, which is a scoring system that relies on different factors, such as usage, history of transactions, and the number of tradelines. It uses a grading system of one to 100, with a score of 80+ is quite good and the higher the number the higher chances of getting your loan approved.
Build a Relationship with your Preferred Bank
Compared to personal credit, business credit has fewer restrictions and building a relationship with a bank is already a common scenario. Building a strong relationship with a bank and a personal banker opens new avenues for you when it comes to loans.
Having a personal banker who understands how you work and how the business operates is willing to do anything within their capacity to help you. You can start off with a bank you’ve been with for years. Make sure to have a positive reputation within the bank to get an advantage and speed through relationship building.
Also, Look at Smaller Banks Credit Unions
Big banks are not the only ones offering loans to businesses. Smaller banks and even credit unions will even sit down to talk about your business plan. When scheduled into one, treat this as a meeting with a future investor. This will help you explain your business proposal better and focused on how your business will make money. Compared to bigger well-known banks, smaller institutions often have more flexible terms, which can help in processing the loan faster.
Understanding your way with business credit can tremendously help you, as a business owner, to have well-informed business decisions when it comes to money. One example is when you’re planning to expand the business by buying a property through listings from National Brokers Network or buy equipment and you need a loan, having educated yourself with the necessary tips, you already know the next big step to fulfil your business plans.
