5 Reasons Why Good Credit is Important for Your Small Business
In the past, businesses used to solely rely upon personal credit score. Financial institutions considered the credit score of the businesses owners for every decision. But this trend has been changed now.
Today, a business needs to have the credit score of its own. In fact, good business credit is one of the top formulas to take your company to the next level. If your organization is deprived of a decent credit report, you will end up missing out on the following perks:
Easier to Secure Loans at Low Rates
Businesses need loans at some point. Especially for small business owners, applying for a loan is their only option to tackle an economic challenge.That’s where a good credit report swings into action.
Of course, all the loan applications are not entertained due to various reasons. However, having a bad company credit is one of the major reasons for rejection. Sometimes,a bad credit report means the lender will take more time to approve your loan — by then it could be too late for you.
On top of that, a good credit score has a lot to do with low-interest rates. If your company’s credit report is in good shape, it will boost the confidence of the lender because you have a proven record of paying loans on time. Being a less risky borrower means you qualify for low-interest rates.
Besides having a good credit score by your side, you can even convince lenders to push their loan limit. Never make the mistake of using the personal credit score to sanction a business loan, because it is the only trump card if your business faces an uncertain scenario. It will be wise to separate your personal and business credit score as soon as possible.
Enhances the Worth of Your Company
You are an enthusiastic entrepreneur and in absolute love with your work — great, it can’t get any better than that! So selling your company might not be on your mind right now, but you never know what the circumstances may turn out to be in the future and you could may be compelled to sell your company.
At the time of negotiation with the interested parties, the company’s good credit report will put you in a great position. Remember, as soon as your company is sold, the credit report will also be transferred to the new owner. Meaning, the purchasing party will also benefit from your past hard work and will not start from scratch.
Therefore, you are unlikely to face any financial drawbacks. Quite the contrary, nothing but agood fortune awaits you.
No Troubles in the Relocation
What if you shift your office at a peaceful place and after some time that area gets populated quite dramatically or your company is going through the expansion phase and the current place is too suffocating, given the number of staff? The first thing on your mind would be to transfer your office to a suitable place. Make no mistake, relocation is not a walk in the park anymore.
The landlords have become quite insecure to lease their place to any heckle and jeckle who asks for it.The landlords would like to see your company’s credit report before signing any official document. If they are convinced that you can afford their place, only then the landlords will proceed further.
Rest assured, not having an ideal workplace can seriously dent the productivity of employees and it will reflect in the company’s sales rather sooner than later.You may have to opt for bad credit small business loans to save your business.
Easy to Find Co-Partners
Well, we all have a personal life and businessmen are no exception. Sometimes an entrepreneur comes to think that he is giving in too much of his time to work and failing to spend quality time with the family.
This realization could be very disturbing and it can force anyone to find a co-partner who can look after your work while you enjoy your personal life. Sometimes, the burden of work is just unbearable which forces you to invite a share-holder.
Again, no potential businessman would invest his time and energy in your company if it is a gone case. He would immediately ask you to show your company’s credit history and a good score will make it harder for him to say no, even when the terms and conditions are decided by you.
Suppliers will Trust You
It is not always possible for businesses to make payments immediately. Sometimes, the purchasing is done and then the payment is made. This practice is known as trade credit. Old suppliers might trust you since you have a good track record with them, but a new supplier will play safe and not trust you immediately — he will never take the risk.
If your business has maintained a good credit score, suppliers and vendors will not find it difficult to trust you. Not only can you buy pieces of equipment first and pay them later, but they are more likely to give you sufficient time to make the payment. What’s more, you will receive favorable termsfrom them. Such is the worth of having a good credit report.
The Final Word
Personal credit score ranges from 300 to 850, while business credit score is measured on the scale of 0 to 100. Except for the difference of numbers, everything else between the two remains more or less the same. Meaning, higher score comes up with easy terms and more flexible rates. You should consider the company’s credit report as the lifeblood of your businessfor it has directly to do with the success of your business.