Building Corporate Credit - A Comprehensive Guide

There are many facets of starting a business

There are many facets of starting a business. While a great business idea and relevant skills are needed, so is financial acumen. Many business ventures fail because the entrepreneur did not plan the finances properly. Assuming that banks will be willing to lend money as soon as you ask for it is an error that can spell the death knell even for the best managed business. To ensure that funds are available when you need them, you need to spend time and effort on building corporate credit right from the beginning.

Start Early

While building business credit is no easy task, by following certain simple steps, you will soon be on the right path. The most important thing is to separate your personal and business finances. By incorporating your business and limiting your liability, you will be doing yourself and your business a great service. Also, get the required licenses and registrations for your business. Obtain a separate telephone number and get it listed in the Yellow Pages even if you operate from home. Banks do check these details to assess your long term commitment to the business.

As getting business credit cards is relatively easy, get them issued and make small purchases using them. For instance, you can pay for gas or office supplies using these cards. Ensure that you pay them in full and on time each month. The credit rating agencies will be monitoring these cards and soon hike the credit rating of your business. This will help in building corporate credit.

Seek Help

If you anticipate fund requirements in the near future, retain the services of a business credit builder. They will advice you on the steps you need to take to convince the credit rating agencies of your genuineness. This is because they know exactly what the agencies and banks are looking for, and will make sure that these criteria are met.

Though banks are reluctant to offer small business loans, they make an exception if the business has collateral to pledge. This either can be machinery or some property. The collateral helps reduce the risks for the bank and makes it possible for you to negotiate a lower rate of interest on the loan.

Small business credit services will also help you prepare a good business plan and a request for a loan that will clearly state the purpose of the loan and the repayment methods. Even when using the services of professionals to help prepare these papers, be ready to answer all questions pertaining to them.

Take Small Steps

Never make the mistake of waiting for a shortage of funds before approaching banks for a loan. By ensuring that you establish credit lines early, you will be able to tap on the bank for funds when you really need them. Borrow small sums in the beginning and repay them promptly to establish trust. The bank will soon be willing to lend you larger amounts to fund your expansion or diversification plans. By building corporate credit early on in the business life, you will be prepared for the time when you need to infuse large sums in to your business to take it forward.

Building Corporate Credit - A Comprehensive Guide

By: Sherry Gain

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