Are you new in the world of business? Are you familiar with how your business credit affects your business? This article will discuss the most common myths about it and truth behind them. Let this be your guide in determining what really counts and what does not about your business credit.
Myth #1: Small business entrepreneurs or home-based business owners don’t have to be concerned about the status of their business credit.
Small businesses may deal with small business lenders but these lenders look into your credit profile just the same. All types of lenders- whether large corporations, prominent banks, small lenders, even individual lenders- all determine the credit worthiness of a business through its credit profile. Each time you apply for a business loan, your prospective lenders will take a look into your credit history regardless of the size of their company.
In fact, most financing firms today process loan applications with the help of an automated system. With this system, the decision whether an application is approved or declined is based upon the credit score of the business. If it fails the cut-off, your application will immediately be rejected. Therefore, all business owners must pay attention to how they maintain their business credit history whether they’re managing a large corporation or just a small business.
Myth #2: There’s really no need to check my business credit profile often.
All transactions you make between the suppliers, lenders, investors and insurers you deal with are reflected in your credit report. Business credit reporting agencies update their files daily and you’ll want to make sure that your own report is accurate. Just as you need to regularly check on your personal credit report to ensure that all information it contains are correct, the same thing applies to your report as well.
Myth #3: Newly start up businesses doesn’t have to be as concerned about their credit as long time businesses do.
As we’ve said, the size of it doesn’t matter when it comes to building an excellent credit. In the same way, even if you’ve just started up, it is a good practice for you to closely monitor your credit profile. In fact, you should be very interested about monitoring your credit report while you’re in the early stages of establishing your credit.
Myth #4: Your cash flow doesn’t have anything to do with the status of your business credit.
When you apply for a business credit or a business loan, your approval depends on how good your business credit profile is. Even if you get approved, the interest rates, credit limits, and the terms that will be extended to you by lenders and insurers are all dependent on your business credit profile. Certainly paying for lower interest rates, getting higher credit limits and enjoying certain financial advantages that are offered only to businesses with excellent credit will affect your business’ cash flow.