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Three Reasons Why You Should Keep Building Business Credit


Jeffrey Bumbales

There seems to be an assumption out there that personal credit is more important than business credit, or at least important in the sense that it can have a greater impact on your finances.

What many business owners are coming to learn these days, however, is that business credit is in many cases equally important, even if your personal finances are closely tied to the financial health of your business.

And, much like personal credit, business credit is tallied and scored depending on the financial performance of your business and the state of your financial ‘health’.

Many business owners are content to simply maintain a decent business credit score and hope their personal credit will help as well, or just to keep conducting business in the usual way without paying much attention to their business credit either way.

Approaching your finances in this way might be a little more convenient, but can really prove detrimental to your business’ financial health in the long run.

Here are a few of the biggest reasons to work on your business credit score aside from your personal credit:

Business Credit Gives You Leverage

Small businesses with low or stagnating credit scores tend to find themselves missing out on a lot of potential leverage when it comes to lending. Much like any sort of personal loan or funding, many lenders will take stock of your business’ credit score to determine the sort of options and funding types available to you.

Maintaining strong business credit can really affect your ability to get favorable terms or higher amounts when you try and apply for small business funding, and it may become a larger problem down the road if you’re unable to secure the funding you need.

Creditworthiness Increases Your Ability To Secure Funding

In the bigger picture, building and maintaining business credit helps you maximize your ability to get funding in the first place. Due to differences in the way the two scores are calculated, business credit actually has a much higher capacity than personal credit alone.

Building business credit can actually provide a far more accurate picture of your business’ financial performance than your personal credit alone could, and this accuracy can make or break potential transactions and deals down the line.

Strong Credit Simplifies Personal Finance Management

Maintaining strong business credit actually can help your personal finances and credit too, in a sense. By separating your business finances and your personal finances, it can greatly streamline things like financial records and tax filings and cause fewer headaches in your accounting.

Furthermore, it can actually be a strong legal safeguard – by separating business and personal expenses, you can preserve the liability protections you can get from officially incorporating your business which would be unavailable to you by using your personal finances to fund your small business.

Building business credit, like building personal credit, can take a lot of patience and effort, but the benefits are clear and will pay off well for both you and your business in the long run.