Give Yourself Some Credit

“Building a credit record for your small business is imperative.  The tricky part is doing it without endangering your own.”

                        Source: Business Week March 2006

Business Credit is also known as Corporate Credit or Trade Credit.  It is the single largest source of lending in the entire world.  It is when one business lends money to another business to purchase products or services from them.

Business Credit is largely overlooked as a core source of financing for a small company.  Most so-called experts will tell you all the ways to get money from your retirement and home equity to fund your business.  Instead a small business owner could obtain business credit from vendors that are going to offer them the products and services they were going to buy anyway with cash from their personal resources.

Another strategy many “experts” tell small business owners to use is to use their personal credit to obtain the financing they need.  In fact, some will say there isn’t such thing as business credit because you always have to use your personal credit.  This couldn’t be further from the truth.  First, you need to minimize the use of your personal credit as a small business owner in order to protect your personal credit score and ability to obtain credit in the future.   Second, if you have poor personal credit already, using your personal credit to obtain financing isn’t an option.  By building business credit separate from your personal credit you are limiting the use of the personal credit score and in many cases you don’t even need it to obtain credit in the business name.

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