Unsecured Business Financing: Building Corporate Credit Basics

Building business credit in order to avail from attractive business financing deals is quite challenging, yet very beneficial. Lack of liquidity is one of the most acute concerns of business owners, as business financing allows businesses to grow faster and save money using the economies of scale. As most business owners and corporate officers do not want to risk their personal credit, they seek corporate credit solutions to satisfy the growing cash inflow needs of their business. The problem is that among thousands of lenders that offer business loans there are barely few hundred that report to business credit-reporting agencies, making it difficult to build corporate credit. Therefore, a profound research of financing options and a thoughtful selection of business lenders is needed to build business credit fast and trouble-free.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 AdvantagesBusiness 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 DifficultWhile 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 CreditYour 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.