Getting credit is hard for all businesses. How you operate your business and whether you have personal assets are two important factors when it comes to obtaining business credit. Unfortunately, many small business owners find themselves having to pass up opportunities because they don’t have the right kind of credit. But does that mean no company will give you a loan? Not at all! Even if your personal assets are high or your company will own real estate, there are other means of getting the cash you need. Here’s how…
Basics of Business Credit
A business credit account is a source of funds for your company. This could be a line of credit from a financial institution, a loan from a friend or family member, or even a credit card. Your business credit report is the document that shows your history of payments. It’s important to maintain a good business credit report, as it can affect whether or not you obtain credit in the future via business credit sources. The report is compiled by one of the three credit bureaus (Equifax, Experian, or TransUnion) and includes details such as your payment history, amount of debt, and the number of open accounts.
Types of Business Credit
- Personal Assets – This type of credit is based on your own assets, such as your home or your car. The value of these items is used as collateral if you use them to get a loan. If you default on the loan, the lender can take your assets.
- Business Ownership – You can use the assets of your company as credit. This includes real estate, accounts receivable (money owed to you by customers), inventory, and machinery. You put your own assets at risk if you use this method of obtaining credit. There are also many ways that you can use your business assets to obtain credit without putting your assets at risk. For example, you can make personal guarantees that you will repay loans made to your company. This means that if the company defaults on the loan, you’ll have to pay it back.
- Guarantor loans – A guarantor loan is like a personal asset loan, except that the lender is repaid directly from your personal assets.
- Credit cards – If your business needs a small amount of financing, you can use a credit card to bridge the gap. Just make sure you pay it off before the due date, or you’ll end up paying a lot of interest.
Conclusion
Your company’s credit is one of your most important business assets. If you have good business credit, it’ll be much easier to obtain financing in the future. If you don’t have the right type of credit, don’t worry! There are many other sources of cash. There are also steps you can take to increase the amount of business credit your company has, such as paying off old debts, keeping accounts open for longer, and improving your company’s financial health. If you want to build your business credit, you can visit https://www.thebusinesscowboy.com/. They can provide you important tips on how you can work on your business credit.
