For decades entrepreneurs and small business owners have become accustom to using their personal credit cards for business expenses. Statistics show that only 50% of the credit cards being used by business owners have the credit cards in the company’s name.
Unfortunately, it’s not uncommon for business owners to rely solely upon their personal credit ratings to secure and obtain financing for their businesses. The good news is there is a better way, a way to protect one’s personal credit while establishing the creditworthiness of the business itself: it’s called business credit.
Business credit is the ability to obtain credit or financing in the name of a business. It enables business owners to achieve true personal and business separation while protecting their personal credit ratings. Now obtaining business credit is nothing new but the concept of building a creditworthy business is.
As a business owner you have the unique opportunity to establish business credit profiles and ratings completely separate from your personal credit profiles and scores. Whether you’ve selected a Corporation, LLC, Limited Partnership, or C Corp; lenders can now review your business reports to assess the creditworthiness of your business.
While you may be familiar with the major consumer credit reporting agencies, Transunion, Equifax and Experian; did you know there are three major business credit reporting agencies as well?
The three major business credit reporting agencies are:
Dun & Bradstreet – this agency is the dominant player in the business credit reporting industry. Dun & Bradstreet has been around since the mid-1800s and today contains a database of well over 225 million business records. Creditors, suppliers, banks, and lenders use D&B’s business credit reports and risk assessment tools to determine what level of risk a business presents. It’s crucial for a business to have a D&B Number linked to a well-established report and rating with this agency.
Corporate Experian – Experian has its own commercial reporting division exclusively for businesses with a database containing approximately 22 million companies. Although much smaller than D&B, Corporate Experian is used widely by banks who are reviewing a company’s credit history.
Equifax Small Business – Equifax not only collects data from consumers, it’s business division houses over 25 million business records and is said to furnish reports mainly to financial institutions and credit card issuers.
Establishing a strong company profile with all three major business reporting agencies is the secret to protecting your personal credit. With a creditworthy business; lenders, suppliers, and banks can check your business credit reports and assess what level of risk your company presents rather than just relying on your personal credit ratings.
A business needs to stand on its own for financing and it won’t be able to do that until it has strong business credit ratings with D&B, Corporate Experian and Equifax Small Business. Prior to getting started with the business credit building process, a business owner needs to ensure the business is ready to build business credit.
Some of the most important foundational components that need to be addressed include but are not limited to: entity formation, business banking accounts, corporate compliance, business assets, business revenues, etc. It’s important to note that a company’s creditworthiness is not just about your business credit profile and ratings. Other factors such as years in business, revenues, bank ratings, and business assets play a role.
By improving the overall credit “health” of your business, you greatly increase your financing opportunities and funding capacity. With personal credit, you are severely limited to the amount of credit you can obtain for your business. With business credit, a creditworthy company can obtain ten times greater credit availability compared to relying solely on personal credit.
Stop putting your personal credit at risk and get credit in your company’s name as soon as possible so you can start leveraging the power of business credit.