subject: Corporate Credit and Expanding Business [print this page] Corporate Credit and Expanding Business Corporate Credit and Expanding Business
Having corporate credit established for a business is the key to its success. Throughout the life of a company the need to establish its corporate credit will most likely arise. Establishing the corporation's credit should be started before the company needs it. No lending institution wants to lend money to a business in need of cash flow. The business can start out using the personal guarantee of owner's or officer's credit to gain approvals under the business name, but as the business gets growing it should start to establish its own corporate credit history and credit profile of its own. A good corporate credit rating is essential to borrowing money on favorable terms. Merely promising to repay a loan won't get you the funds you want. Commercial lenders will look to objective standards to assess whether to advance money to your corporation.
But why borrow money at all? Well you could wait to amass, via savings, all of the funds you'll need to grow and maintain your business; however this will significantly delay your business plan. If you are able to save $1,000 per month, it would take you over four years to save $50,000 to start your business! By attaining corporate credit, you effectively save yourself the headaches of waiting to startup your business.
When officers and owners use their own personal credit profiles to obtain credit for the business, they risk the chance of lowering their own personal credit scores. There are two reasons business owners should try not to use their personal guarantee on corporate credit. First, the individual signer is liable if the business cannot make the payments and second the credit obtained for the business can in many cases affect the person's personal credit score.
However, there are specific lending products available to start up businesses that owners may take advantage of without harming their personal credit. While these credit lines may require a personal guarantee, the amounts approved are not reported to the business owner's personal credit, thereby sheltering his debit/credit ratio. These corporate credit products are optimal for start up business with no corporate credit history or D-U-N-S number.
