Reestablishing Financial Standing for a Company

Reestablishing Financial Standing for a Company

The majority of businesses prefer to be able to borrow money as needed without having to personally guarantee the loans.The owners' exposure is reduced as a result. But wanting credit for your company and really earning it might be two very different things.

Over the past two years, one firm has built a thriving business from the ground up, employing twenty people or more. Yet they were unable to secure a loan for their company since they had not established a business credit profile.

You may have heard advertising jargon to the effect that a strong company credit profile will help you be approved for a loan despite a poor personal credit history. But it's crucial that small enterprises have good commercial credit as well as solid personal credit from the proprietors. This is especially true in the present climate, where funding is scarce and investors aren't willing to back any company plan. Certain loans or credit cards will require personal guarantees from business owners, even if the company has excellent credit.

Even if your personal and business credit are intertwined in certain ways, creating business credit is an entirely separate process. Experian, a global leader in credit information, offers a business credit score that takes into account both the company's risk profile and the owner's personal credit history.

Furthermore, unlike personal credit, company credit is not covered by consumer credit protection regulations. So, it is important to get off to a good start, as it may be challenging to make changes later on.

The two most important aspects of obtaining credit for a firm are:

Establish a legitimate corporate structure and perform other foundational tasks to give the impression to business credit bureaus that your company is solid and well-established. Among other things, this entails securing the relevant business permits and ensuring that the company's phone number is included in directories. Establishing a solid business credit rating typically requires a formal corporate structure for your company.

Get financing or make purchases from merchants who will relay your payment history to the major business credit reporting bureaus like Dunn & Bradstreet and Experian.

The finest corporate credit scores are reserved for large, stable enterprises, those with several million dollars in annual sales and 25 to 50 employees or more, in contrast to personal credit ratings, where you can have a tiny income and earn a top FICO score.

Don't let it deter you, though. With enough planning and forethought, a new business may get off the ground with a respectable credit score and secure the lines of credit and financing it needs to succeed.

Notes of Caution

One, you can't "purchase" your way to good credit. Some businesses "sell" customer recommendations for a hefty sum. It's a con, and the credit bureaus will remove the references if they find out about it.

Never invest a lot of money in a shelf corporation from a service that "guarantees" you will be able to use it to receive loans. In most cases, the business lacks the necessary credit rating.

Don't try to use your company's credit to make up for poor personal credit. Start repairing your personal credit history at the same time as you establish your company's credit history.

Entrepreneurs typically possess the qualities of diligence, originality, and initiative. These are also traits that will serve you well as you work to improve your company's credit. Launch immediately! If you want to learn more about establishing good credit for your company, check out www.BusinessCreditSuccess.com.