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Building Business Credit

Business credit is one of the most overlooked assets that a business should have. It is something that is never discussed by the banks even though they review business credit as part of their business loan process. Maybe it’s because they really don’t like to deal with small businesses because the money is small compared to their big business accounts. All though they do decline small businesses for funding do to the lack of business credit or because of derogatory items listed on the report, they never disclose the reason to the borrower. Alternative lenders too, pull business credit reports but lean heavily on personal credit for their underwriting decisions. And the last group to speak little of business credit is the credit card industry, whether its retail or bank cards, they do not push their business cards because they would rather you sign for credit personally so that they will have a route to go after you if you default.

All theses hidden secrets about business credit leaves business owners thinking that it is a ruse and that if it is real it’s only for the big businesses who with private parties, private jets, fancy restaurants and big corporate parties need to have the corporate credit cards with no limits.

The fact is that the benefits  for small businesses are real. Building and maintaining business credit allows these businesses to negotiate better terms with vendors, it provides easy access to cash thus making management of cash flow easier, it promotes growth and viability, and increases the value of the business.  A great example of these benefits is Walmart. Yes I know that Walmart is huge but it’s an example that works across all size businesses. When Walmart orders stock they utilize their credit position with the vendors to stretch out their net payment date up to 30 to 60 days.  Walmart gets the inventory to the stores and buy the time the vendor bill is due they have already sold the product and received the income which they are than able to pay the vendor from the money that the product has earned. This is Walmart’s method of maximizing cash flow. And by the way, if you want to work with Walmart they require that you have business credit set up.

For a business to be well rounded, especially for the small business that we find in our communities, the business owner should also maintain personal credit to have a strong foundation. With a small business, lenders my feel they need more factors  to complete the underwriting process and may want to view the personal credit. By viewing the credit they can access the financial risk and build confidence to go ahead and fund even though they do not ask for a personal guarantee.  As a small business, they do not have the financial assets, stock holders or even the status in the banking community that big business does, so a few extra steps may be needed as they grow to satisfy lender concerns.

Below is a link to the Business Credit Ebook. This will provide you with more information about business credit. 

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The Ebizmore Small Business Accounting Service includes building business credit and a lot more focused on the growth of the company.  Introducing this program is not only beneficial for your small business client but it also provides you with ongoing residual income. Contact us for more information at info@ebizmore.com