Unsecured Business Financing: Building Corporate Credit Basics
Healthy corporate credit is a key to a business success and is a dream of many business owners. Building corporate credit is not hard, provided you follow certain procedures and exercise some patience.
Most start-up owners and managers have to make personal guarantees on loans for their newly formed entities. For some, it is additional and unneeded risk, for others it is inability to attract financing due to insufficient personal credit scores. That is why many business owners fall victims of lenders specializing in cash advances and bad credit loans, having to overpay huge amounts in interest charges and fees. An established corporate credit always eliminates the hassle of providing personal guarantees and using personal credit to secure business financing.
Business Loans Have Numerous Advantages
Business loans very often feature advantageous terms over personal loans, making them a money-saving tool enabling business to attribute larger cash flows towards development and dividends to owners. In addition to earlier-mentioned benefits, such as no need to use personal guarantees and low cost of financing, there are some other advantages. Interest on business loans is tax-deductible, allowing more efficient tax management. In addition, unlike personal loans, there is barely a limit on how many loans a business may take out. That is exactly why all the effort and cost of establishing corporate credit always pays off at the end of the day.
Building Corporate Credit Is Not All That Difficult
While building corporate credit is not as hard as most people think, it requires thoughtful planning and sufficient time. Many business owners make a mistake of trying to get ahead of the game and applying for business loans while having no established corporate record on file with credit-reporting agencies. Therefore, the first step to establishing corporate credit is to set up manually a business profile with major business credit reporting companies. Having your company listed with D&B, Experian, and Equifax is necessary before attempting to apply for business loans.
Patience And Thoughtful Approach Are The Keys For Solid Corporate Credit
Your next step should be trying to establish credit accounts with modest credit limits with vendors that report to above agencies. Another mistake many people make is applying for large loans they would not be able to get and ruining their newly created credit record with unnecessary inquiries. Therefore, always apply for small loans with lenders that have the highest approval rates. Once a couple of credit accounts are created and are reporting to business credit reporting agencies, it is important to establish a positive repayment track and age them to raise your corporate credit score. Once again, there is no need to hurry.
Getting a corporate credit card is the next important step in your corporate credit-building process. Unsecured credit accounts that are paid on time have the most positive impact on your company credit profile and your business credit score. Having a history of timely payments on a corporate Visa or a MasterCard would prepare your business for the next level of financing. It is a good idea to check your Paydex Score and D&B risk profile before applying for larger loans. Once your Paydex Score crosses the 75 mark, you should be in good shape to seek unsecured business lines of credit with limits of up to $50,000 or even more. From this moment on, your only responsibility is to assure timely payments on your business loans, as getting more corporate credit should no longer be a problem.
Article Tags: Building Corporate Credit, Unsecured Business, Business Financing, Building Corporate, Corporate Credit, Business Credit, Business Owners, Personal Credit, Business Loans, Personal Guarantees, Credit Accounts
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ABOUT THE AUTHOR
Lara Sawyer is the author of this article. She works successfully as a financial advisor with years of expertise on Guaranteed Bad Credit Loans. She publishes informative articles about Money Lenders for Bad Credit, home loans, credit cards, auto loans, business loans and others at http://www.fastguaranteedloans.com