According to the US Small Business Administration, 27% of businesses fail to grow because they’re unable to find the required funding. The SBA also goes on the state that one of the prime contributing factors here is a low credit rating, which makes investors reluctant.

Let’s try and understand what business credit is: If you’re an entrepreneur who aspires to change the dynamics of the market by bringing your million dollar idea to life, you’ll probably go to a financial institution in pursuit of funds.

Now, instead of looking at your FICO score, companies these days take your credit report into account. Simply stated, this report looks at your reputation and tells lenders whether your company can be trusted to repay in time.

why is good credit so important for a small business?

It helps you grow your business

Starting up a business isn’t as tough as making sure it’s thriving beyond the break-even point. As brand awareness for your company increases and demand for your product exceeds supply, there’s a need to target new market segments, introduce more variants, buy updated equipment, and spend more on promotions. All of this needs capital.

If your business credit isn’t good, the chances are that you’ll be charged a higher interest rate. If it’s very low, your request for a loan might even get rejected. This will make all your business expansion plans go down the drain and your competition might outdo you sooner than you think.

You can keep your business and personal credit separate  

If you haven’t maintained a good enough business credit profile for your startup, you’ll most likely be relying on personal credit cards to obtain funds. This can be a problem in many ways.

See also  Debit vs. Credit Cards: Which Is the Better Way to Pay?

Firstly, business owners who do this lose track of their business and personal expenses and fail to differentiate between the two. This often leads to overstating or understating profits and can cause further financial discrepancies.

Also, if your business hits rock bottom, it deteriorates your personal credit profile. This means that you while you weren’t getting credit for your business anyway, now, you can’t even apply for housing or a car loan.

Show the reliability of your company                            

In case you want to sell the company to a potential buyer, an attractive business credit score serves as a transferrable asset and will yield value. Good creditworthiness puts up an impression that your company is trustworthy. This reputation goes a long way in helping you negotiate a better amount when you’re selling out.

Also, if you build good business credit, you can survive times when the company is in a financial crunch. Let’s say something goes wrong and your sales go down, a good business credit score will enable you to continue paying your employees their monthly paycheck through other means till the business is back on the track.

To build a good business credit or improve an existing score, contact us. At Masters Credit Consultants, our credit repair consultants help you take negative items and inquiries off your credit profile. If you’re based in South Carolina, contact us for a free consultation by one of our credit analysis specialists. In case of any questions, feel free to call 1-844-620-8796.