Build Credit For Your Business Once You Have Started It
Business once established do not face too much of a problem arranging for credit, if they are properly managed. You may not have to make a personal guarantee if the prospects for the business are seen to be good. You must make it a point to build up a business credit profile while you run your business and this could help you a lot when you approach financial institutions for credit.
It is necessary that a small business, especially one that has just started, have good business credit, and be backed up by a personal credit of the owner that is also very strong. Nowadays, the present depressed scenario makes it all the more necessary, and venture capitalists are quite wary about offering fresh credit. Owners are even being asked to provide their personal guarantees and assets even where the business has been well established.
Building a business credit profile is quite different from establishing your credentials as a person and proving your credit worthiness. Maybe the assessing authority will combine your personal credit worthiness while making the judgment on your business credit, but for them that is additional insurance. Laws that protect your personal credit are different from those that are involved in business credit, and you need to be sure of these before you build your business credit profile.
Set up your business in the proper manner taking care of all the legal requirements, such as licenses, registration with the concerned statutory authorities and local business associations. See that your business phone and address is properly listed in all the telephone and concerned trade directories, with sufficient information available on persons to be contacted etc. If your business has a corporate structure or partnership see that it is properly documented and filed with all the concerned authorities and complies with all legal requirements.
When you are buying products from established firms see that you maintain a good credit policy with them so they will report your credit history to such agencies and thus improve your chances of having a good credit profile. Doing this would ensure that you have a very good credit rating and would be able to easily borrow from venture capitalists.
Do not let yourself be conned into buying credit ratings. Once you start a new business such people will come out of the woodwork and assure you of a good credit rating. Do not fall for such scams. Establish this credit on your own by your own dealings. Be wary of any such bogus companies that will guarantee that they will get you loans. They are highly unlikely to have a good credit rating themselves. Never mix up your personal and business credit and try to substitute one with the other. Instead concentrate on building up whichever credit is deficient. As an entrepreneur you must be hard working and willing, and you must carry this same dedication to building your credit.