Shocking truths bring you up short when you don’t see them coming.
For instance, some business owners find out, after getting turned down for a loan application, that their business credit is just as important as personal credit. Some didn’t even know there was such a thing.
As devastating as that news is, it’s important to seek answers to questions when you aren’t sure what to do next. Andrew Carnegie, a business magnate, must have gotten help many times based on this quote.
“No person will make a great business who wants to do it all himself.”
Building anything may sound complicated but in this case, it isn’t. In fact, there are advantages to knowing how to build business credit.
The Benefits of Having a Solid Business Credit Score
Most business owners don’t know exactly when they’ll need funding. For that reason, they start building their business credit as soon as they can, so their businesses are positioned to qualify for financing any time in the future.
Lenders can’t determine if you’re creditworthy until they can document how you repay borrowed money. If you’ve established a favorable business credit score, lenders usually offer lower interest rates without requiring a personal guarantee. They offer better terms and may increase your credit limit.
Additionally, suppliers will want to do business with you and lenders won’t hesitate to approve loans. Equally important is that it helps business owners feel less stressed because they know they can get money quickly, in any kind of business-related emergencies, won’t be a problem.
Luciana Struggles finding time for her family, could a loan help her?
Luciana Flores runs a beauty salon that’s attached to her home, she’s been the owner for a couple of years now.
Sometimes her children run in and out of her shop while playing or stop by to ask Luciana questions. The children know they shouldn’t interrupt their mom but they forget. After all, you can’t really stop a child from being a child.
In order to juggle these pressing challenges, Luciana believes that it’s time to lease space away from her home.
For quite a while, she’s wrestled with balancing her home and work life. She applied for a business loan and her application was rejected. Luciana has no clue why that happened because she has an excellent personal credit score.
She feels disappointed and isn’t sure what to do next. Fortunately, the lender saw her disappointment and decided to explain to her how to build business credit. He suggests that she get a business credit card and a separate checking account in her business name.
So she does, she also applies for an employer identification number rather than using her social security number for business transactions.
After a few months, Luciana reapplies for a loan and this time she’s approved. By moving her beauty salon to a commercial site, Luciana has walk-in and returning customers. Her children are happier too because they stay at their aunt’s house and play with their cousins.
By separating family and work life, Luciana is able to concentrate on growing her business.
Your Business Score Is Important Too
Maybe you don’t know how to build business credit or haven’t even thought about doing so. It’s quite an awakening when you find out how important a business credit score is when you’re turned down for a loan.
In addition to benefits already mentioned, you will also save money by not paying higher interest rates and expanding your business when the opportunity arises.
To avoid going through the heartbreak of a loan rejection, make sure you take steps into improving your business credit. Knowing how to reap the benefits of having both personal and business credit histories as part of your business’s financial profile will be one of the best decisions you’ve made.