For small businesses, credit cards are used extensively. After reinvesting earnings or obtaining a bank loan, credit cards are nationally the third most popular financing choice. Whether it is starting a new business, needing to purchase inventory, expanding an existing business or just strengthening the firm, small businesses may find the need to obtain capitol.
Establishing Business Credit is Good for Business
It is important to keep the personal credit cards straight from the business credit cards. There are a few good reasons for this:
Business and Personal Credit are Distinctive
Most people are familiar with the FICO scoring. Personal credit scoring 680 or higher represents an excellent credit risk. Business credit scoring has a range that goes from 0 to 100 with an excellent rating starting at 75 or higher. There are numerous factors that can impact the business credit score.
Further, it is not advised that business owners use their personal information to apply for business credit as this could result in lowering the personal rating. At the same time, the business credit rating does not gain anything when the credit is tied to the personal information. By not building up the business score, future business credit could be at risk. It is smart to work with companies that will help contribute to building up that score with the appropriate credit reporting agencies.
Seek Ways to Protect Personal Assets while Building Business Credit
There are some basic steps businesses take to help protect personal assets from business liabilities. One of the more fundamental steps to structuring the business is to form a limited liability corporation, or an LLC, instead of designating the business under a sole proprietorship or a partnership. This way, personal assets are not at risk in the event of litigation. This also makes it possible to apply for credit under the business without having to go through a personal credit check or guarantee. In such cases, it is useful to seek no-red-tape sources such as Advance Funds Network.
Other steps to take are:
A business line of credit is one way to fund business ventures. Even businesses that have only existed for six months may qualify for a line of credit providing sales of at least $10,000 have been attained within that span of time. At www.advancefundsnetwork.com, AFN can help determine the qualifications for easy financing.
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