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What you should know about business credit

womancomputerhotel30420644.jpgBusiness credit is an integral part of your small business financial picture. When you began your small business, you might have relied on your personal credit, to get your small business up and running. However, after your small business is established it is important to focus on obtaining business credit. Business credit can be the next stepping stone, for the growth of your small business. Here is what you should know about business credit-

  • Understand the impact of a credit rating-You can run the risk of lowering your personal credit rating, if you are using personal credit, to finance your small business. Since it is important to maintain a stellar credit rating, both personally and for the business, you need to focus on obtaining business credit. Keep in mind that if you use personal credit, for business financing and your business goes under, you will still be liable to repay any loans or lines of credit you have used, for the business. In addition, once you have established credit, for your business, it provides protection, for your personal assets, that you won't be risking if the business does fail.
  • You will need business credit to expand your business-If you don't have business credit, you may not able to obtain the financing, that you will eventually need to expand your business. Keep in mind that lenders will look closely at your business credit report. They will be looking to see if you pay your bills on time, how much debt you have and how large a business credit history that you have. All of these things will be used to determine if you are a good risk, for further business financing. If you are unable to get the business financing you need, you may quickly find yourself going nowhere with your small business.
  • You need to take yourself and your assets, out of the equation-It cannot be overstated how important business credit is, in protecting your personal assets. Having business credit means that you will not have to give a personal guarantee on business financing. A lender will require that you personally guarantee a loan, if you do not have significant business credit. If you have to give a personal guarantee that means that you are taking on the full responsibility of the loan, not matter the course of the business. You will be totally responsible to repay the debt, even if the business fails.
  • Business credit helps you become a legitimate business-You will need to establish a legal business entity, in order to be recognized as a legitimate business. Part of this is done by establishing business credit. You should consult with your accountant or a tax attorney, to determine which business structure is right for you. They can also help you in separating your personal and business finances, along with the process of establishing business credit. This type of structuring then makes your small business much more credible.
  • Setting up a checking account can also help-Opening a business checking account can also be another great way to establish business credit. As your checking account starts to age, it will establish more credibility, for your small business. This is also a very easy method to use to create a separate identity and begin establishing a reputation, for your business. Opening a business checking account can also be the first step in establishing a relationship, with your bank. This can be helpful when you return in the future to seek out further financing, for your small business. In addition, your bank can also help you get loan, credit cards and lines of credit that you may need, for business expansion.
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