Whether you are a brand new business, have been operating for a short time, or you have been in business for a while now, establishing and maintaining business credit is a means to keep your business growing and is a natural outgrowth of the reason you chose to incorporate or form the LLC, that is protection of your personal assets including the family home.



Establishing and maintaining your business credit is important to: Build the credibility of your business, Preserve your business's cash flow, and lower your business' interest rates, to name just a few. Many small business owners find the task of growing a business and entering the maze of business credit to be overwhelming.

While a business owner may have excellent personal credit, examples of just a few of the matters for your consideration are: What are the two largest business credit bureaus, What credit scores are lenders looking for, How to locate a company to grant your business credit, and Do all companies report to a business credit bureau?

Obviously, all of the issues connected with business credit cannot be addressed in this context. However, there is one basic matter - that of a personal guarantee - to review.

As a business owner, you established a corporation or LLC in order to protect your personal assets in the event of litigation. As a business, you have adequately capitalized your business, are not commingling your personal assets with the company assets and pay attention to corporate formalities.

Those are the steps you were advised to take in establishing your business and they should protect your corporate veil from being pierced in the event someone believes there is a basis for litigation. However, at odds with your careful actions is the world of business credit.

As you open your doors and seek to rent business space, one of the first things that may happen is the landlord, in conjunction with the lease, will seek your personal guarantee of payment.

Next, you contact a bank about opening account and establishing a company credit card. The banker will tell you that you have no corporate history or profile, so it too requires your personal guarantee. At issue: These personal guarantees have opened the door for a potential litigant to pierce your corporate veil in order to reach through to your personal assets.

There are methods to counteract the demands of your bank, which may include: If your business has sufficient capitalization to cover the debt or a means to do so, work with bank on a compromise or an alternate plan, which will eliminate or limit a personal guarantee.

Foundational to good business credit is establishing at least three (3) trade references. Locate these references, one or more of which may be necessary to your type of business, establish a relationship, monitor payment amounts and scheduling and verify that these businesses report your relationship and relationship to the business credit bureau you may be working with.

All in all, your company's business credit is an important aspect of its future as well as your family's financial stability.