7 Reasons the credit score of your business matters |
Posted: July 31, 2017 |
Most business men are acquainted with the credit score of theirs. It is essential when renting an apartment, applying for credit cards, home purchase, Business loans etc. building a good credit history will result in lenders approving your loans much more easily. The credit score of Business Insurance Cabotis quite similar to that of credit score of individuals. The factors influencing the credit score are the history of applications for credit by the business, in time clearing of supplier invoices, handling the lines of credit your business extends. These data are compiled and recorded and then forwarded to credit bureaus like Experian, Equifax or Dun & Bradstreet.
When an application for a line of credit or loan is submitted to the bank, a great number of financial verifications are done before deciding in favour of providing it. A great number of small business are applying for alternative and non-traditional lines of credit. Hence the importance of having a good credit score is crucial for your business. The seven important reasons to build a good credit score for your business are Maintain Your Business and personal finances separately and clearly. This is a vital step you must take if not already implemented which will protect your business and save you book keeping time. When you set up credit under your business name, the law will treat your personal finances and business finances with clear difference. If the business and personal expenses are not maintained distinctly you could be held responsible for the debts incurred by your company. Protection of Personal credit Report When the business credit is growing it is important to be aware that number of credit sources are reporting these to your business credit report only. Safe guarding the personal credit score is as important as the businesses credit report. Building the business credit identity The business will substantiate its own scores, credit history and ratings by creating an unique identity with the credit reporting agencies. The company that is credit worthy will benefit from favourable access to lenders. Safeguarding and enhancing Personal credit scores Credit scores are very important. When the business purchases are accounted to the business credit card, the reporting of business credit card’s activity is done to the business credit report and not to the personal credit report. The benefit of this reporting is that any outstanding balances on the business credit card will not affect the personal credit score. Limiting the personal liability for business debts Building of credit under the business identity results in limiting the liability of personal liability for the business debts being charged to the business identity. In case the personal credit card is used for this purpose of business, the creditors can fix personal responsibility for the debt. Making the business more attractive to Creditors The account history being substantiated gets added to the business credit report and this is scrutinised whenever a credit application is put forth for approval. The evaluation of the business credit report will determine the credit worthiness of the company and the decision of the lenders is based on it. Building the Business Credit Asset By building the business credit asset the business is able to follow good management procedures and enables small business owners to initiate actions for future growth of the company. Establishing Business credit is crucial to running and sustaining a successful business and the credit reports play a vital role in being able to get the necessary funding for the smooth running of the business.
|
||||||||||||||||||||||||||||||||||||||||||
|