Business Credit
Small Business Credit: Establishing and Benefits
For small businesses structured as limited liability companies (LLCs) or corporations, the significance of segregating business and personal credit histories cannot be overstated. This separation crucially mitigates the impact of personal financial challenges on your business credit profile. In essence, personal financial missteps will not influence your business credit score, provided there is a well-defined boundary between the two. This safeguard works reciprocally, ensuring your personal credit remains unaffected by business financial issues.
The Importance of Separate Credit Histories
Establishing robust business credit is a pivotal step for any burgeoning small business. This strategic move ensures:
- The creation and maintenance of a distinct credit history independent from your personal credit records.
- The realization of numerous advantages linked to possessing strong business credit.
- A clear demarcation between business owners and the enterprise itself reinforces corporate integrity.
Why separate a business from the owners?
Unless you’re operating your small business as a sole proprietorship or general partnership, you need to demonstrate that the business is separate from the owners. One of the key benefits that corporations and LLCs provide the owners is protection of their personal assets. Keep this protection in place by consistently showing clear separation between the owners and the business.
Benefits of having a good business credit
Having good business credit can provide a number of benefits to a small business, including
- Positioning your company for more favorable payment terms with new vendors and suppliers
- Reducing the number of times you’ll need to prepay for products or services purchased
- Allowing you to obtain better interest rates and credit terms from lenders and banks
Once you have established good business credit, be sure to monitor and protect it, just as you do with your personal credit.
Why separate a business from the owners?
Unless you’re operating your small business as a sole proprietorship or general partnership, you need to demonstrate that the business is separate from the owners. One of the key benefits that corporations and LLCs provide the owners is protection of their personal assets. Keep this protection in place by consistently showing clear separation between the owners and the business.
Benefits of having a good business credit
Having good business credit can provide a number of benefits to a small business, including
- Positioning your company for more favorable payment terms with new vendors and suppliers
- Reducing the number of times you’ll need to prepay for products or services purchased
- Allowing you to obtain better interest rates and credit terms from lenders and banks
Once you have established good business credit, be sure to monitor and protect it, just as you do with your personal credit.
