Business Credit
Business credit for a small business
Establishing business credit is an important step for any new small business. It helps you to:
(1) maintain a credit history separate from your personal credit history,
(2) experience the business benefits of having good business credit, and
(3) demonstrate separation between owners and the business.
Why separate credit histories?
If you have formed a limited liability company (LLC) or corporation for your small business, having a business credit history separate from your personal one can minimize the effect negative events one might have on the other. For example, if you have some financial missteps that impact your personal credit history and score, they shouldn’t impact your small business credit if you have established a clear separation and vice versa.
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.
