You may not realize it at the time, but your business credit is just as important to the overall health of your business as your personal credit is to your private life. Many creative people will rush headlong into starting their own business without any inkling on how to create a healthy business credit profile. Let's take a look at a few basic steps you need to take to give your new business the healthy start it needs to get off the ground.
Separation is Key
There is a reason why so many companies out there are listed as corporations. When a company becomes a corporation, it essentially becomes its own person with its own credit profile and history. Even if your own personal credit is sterling, you want to create a LLC or limited liability company so that in case your business fails, your own personal credit will remain untouched. You should never, ever run a business based on your own personal credit profile. The failure rate, even for well run businesses, is simply too high and the cost is far too great.
Stick to the Plan
Next, you need a first class business plan. If you aren't familiar with business plans, they are like an outline for your business. Before you can lay a single brick or write your first line of code for your business website, you need to have a viable, successful business on paper. You will need to outline every expense, from overhead to employee salaries to incidentals. You will need to go into detail about the product or service you will be providing and how you plan on making a profit. A viable business plan is absolutely essential to getting the loans, and the credit, you need to start your business.
Cross your T's and Dot Your I's
Going hand in hand with your business plan is making sure that you have all of the necessary permits and legal permissions you need to start your business. If you are planning an online business, make sure that you are allowed to run it out of your home. You could have the best written business plan in the world but if you can't get your business licensed, it is a non starter and no bank will even consider extending you the credit you need.
Time to Get Assessing
Before you head off to your lender of choice, you will need to perform a credit assessment. A credit assessment is an evaluation that you can perform that will give you an idea of the standards you need to meet to get the necessary financing. These assessments don't take very long and they can give you a goal to shoot for so you don't waste time talking to a lender who is simply going to turn you down.
Once you've gotten an initial investment from a lender, it is up to you to maintain a good credit score. Vendors will be much more willing to do business with you if you have a small debt load, and it will be easier to convince other investors to come on board if you are paying your bills on time. Getting and maintaining a good business credit score is all about preparation and execution of your business plan.
Build Credit Slowly Getting credit can be one of life's Catch-22's: it is hard to get credit if you don't already have it, and if you already have it then you don't need it. Young people and those who have never borrowed need to build credit over time so that they can qualify for larger loans when needed. The Need to Build Credit If you do not have a credit history, lenders do not know whether or not they should give you money. Without any credit history, they can't tell if you are a responsible debt -payer or a bad risk. You need to build credit in order to prove your creditworthiness. Who Needs to Build Credit? Anybody without a history of using credit needs to build credit. You never know when the need for a loan will arise, and it is a lot easier to get a loan with a solid credit history. Young adults who are just starting to learn about financial responsibilities need to build credit, and recent immigrants to the U.S. also find themselves without a credit history. Ways to Build Credit It is actually pretty easy to build credit. Try one of the following ideas: ?Ask your bank or credit union about a secured credit card. You can make a deposit to your account and have a credit limit in the amount of your deposit. The bank takes little risk and you build credit slowly. ?Use a co-signer on your first few credit accounts. Lenders will consider the co-signer's existing credit. The co-signer essentially ?vouches? for you while you build credit. Note that this is a big responsibility ? you can cause major headaches for the co-signer if you don't pay as agreed. ?Use credit programs for modestly large purchases like furniture. For example, you may buy a television on the ?$40/Month Payment Plan?. These programs can be easier to qualify for and they certainly help you build credit. Be sure that the retailer will report your loan to the major credit reporting companies. ?Get a credit card with any reputable institution that will give you one. Again, you have to make sure they'll report your timely payments to the credit reporting companies. Of course, you have to always pay at least the minimum before the due date. Risks of Building Credit Remember that credit can be a useful tool, but it can also get you in trouble. After you build credit, you may be inundated with offers. Banks, credit card companies, and others will want to loan you money because they'll know you're a good borrower. Don't take them up on every offer -- only borrow money when it truly benefits you. About Christian Credit One, Inc. Christian One, Inc. is a national, non-profit Christian organization dedicated to helping consumers achieve financial wellness through Christian . Established in 1994, has helped over two million individuals achieve financial security. Christian One is one of the top members of the American Association of Organizations (AADMO), Christian One manages clients across the country. Personalized and confidential consultations are available in person, by phone or online. Visit Christian One or call 888-767-9155.
Greg McTaggart, Certified with 22 years experience, licensed by AFCPE, Director of Christian One and is an expert in budget and Christian . Having the combined experience as a licensed Real-estate salesman, Mortgage Broker, Real-estate Broker, Notary, Ace Member of the Cincinnati Executives, Mortgage Assistance and Spokesperson of the radio talk show The Money Mentor, Greg McTaggart is a qualified Christian to help you.
Both Mark Warner & David Russel are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Mark Warner has sinced written about articles on various topics from Family Concerns, Do it Yourself Sunroom and Legal Matters. Mark Warner is a Legal Research Analyst for RealDealDocs.com. RealDealDocs gives you insider access to millions of drafted by the top law firms in. Mark Warner's top article generates over 27100 views. to your Favourites.
David Russel has sinced written about articles on various topics from Finances, Debts Loans and Finances. About Aouther: Greg McTaggart, Certified with 22 years experience, licensed by AFCPE, Director of Christian. David Russel's top article generates over 3600 views. to your Favourites.