Launching a small business is challenging. In addition to managing operations, partnerships, and customer relationships, your company needs to establish strong connections with creditors to keep operations flowing.
Struggles with cash flow and credit can hold your company back. These issues also tend to be the top reasons small businesses fail. Discover common challenges with business credit that you should avoid.
Registering the Business Incorrectly
Credit companies are eager to establish relationships with promising businesses. However, creditors need to be aware that you exist as a legitimate organization before working with you.
Insufficient registration details can make it harder for you to start a credit account. Ensure your business is on your state’s registry, which helps lenders know who you are. These companies will send you specials and offers to compete for your business.
Remember to register each entity you own separately. Individual registrations let each company have its lines of credit, expanding your access to financing.
Continuing to Use Personal Credit for the Business
Many entrepreneurs start their companies by using personal credit. However, you often benefit by transitioning to business credit as soon as possible.
Starting soon with credit for your company helps you build your credit rating. Then you become eligible for better offers and can more rapidly increase your available credit.
Shifting away from personal credit also protects your private assets. When you mix business and personal accounts, any legal action against your company can also pursue compensation from your personal property. Keeping your company finances separate can save you headaches later.
Not Using Credit Card Rewards and Perks
Business cards offer cash back, travel miles, and other rewards. As you use your card, you are essentially putting money back into your account as long as you pay off your monthly balance. Plus, if you manage your card well, you’ll eventually qualify for better cards with more rewards and higher credit limits.
Credit cards also provide purchase protection you won’t have with cash or a debit card. You can dispute improper charges and avoid making a payment until the company resolves the issue. This level of security can keep you from cash flow problems.
Not Monitoring Credit Scores
As with personal credit, understanding your business credit activity is vital to getting the most out of it. Understanding the scoring models and how to check your history alerts you to what steps to take to keep your rating strong. Also, you can catch any errors or attempts at identity theft early.
Building credit for your business takes patience and diligent attention. If you put forth a concerted effort to establish and monitor your credit, you can avoid major challenges and advance your company. If you need an unsecured line of credit, or financing that is not dependent on credit ratings, contact the team at Latta Commercial Capital today.