Building business credit is an essential business obligation for serious entrepreneurs. When they look towards potential options for a capital injection, these business owners often enlist the assistance of a commercial finance broker or lender.
Lenders and creditors want to ensure that their money grows when they give it to a business entity—and one of the best forms of reassurance they’ll seek is a reputed business credit history.
That said, what are the perks businesses can enjoy from building business credit? What is a business credit score? How do you go about building business credit in the first place?Â
Let’s explore the importance of building a business credit history and how you can improve your business credit score organically.
The benefits of having good business credit
While small-time entrepreneurs can get away with using a personal credit card for business spending activities, going this route can put the business at a massive disadvantage once they look towards scaling. As such, it’s essential to establish and prioritise building business credit right from the get-go. Here are some key benefits of having good business credit: Promotes Credibility Among Stakeholders Legitimate business entities are eager to partner with other established businesses. A hallmark element businesses seek—whether they’re a supplier, lender, or potential business partner—is how well your enterprise handles its finances. You will be perceived as trustworthy and reliable if you have a good business credit history. This allows your business to enjoy increased opportunities you may otherwise not have access to if you lacked ample credit. Furthermore, good business credit can help you gain more flexible terms with your suppliers. This makes your supply chain management systems open and loose, ultimately helping you make more suitable business decisions according to your needs.1. Access to better financing options
Credit agencies may seem needlessly rigid in their rigorous loaning service, but it’s important to know that at the end of the day, they’re still a business like yours looking to survive and thrive. They wouldn’t want to shoot themselves in the foot by partnering with a risky business that’s on the brink of collapse. As such, if you want to attain favourable terms for your business loans with these institutions, having a high business credit score is important. This business score is proof showing them that you can pay back the loan terms on time.  By having a good business credit score, your commercial finance broker or agent will also be more likely to see eye-to-eye with your exact business needs, enabling you access to business overdrafts and long-term loans that your business can use and dutifully pay back.2. Improved credit limits
Good personal credit can grant you adequate funding, but for larger-scale operations, there’s no better way to go than to access loans while leveraging business credit. Business credit is designed to handle the spending needs of an entire organisation. This is unlike personal credit, which is tailored to an individual’s spending habits. That said, not just any business can enjoy the increase in credit limit. You’ll have to prove to the loan provider that your business is gaining substantial amounts of revenue and has a good grasp on its cash flow. Once you’ve established that you’re running a successful company to your lender, they’ll happily provide you with a higher credit limit.Â3. Helps scale your businessÂ
Need a certain piece of equipment to bring your business to the next level? Or perhaps you want to stock up on a certain piece of inventory that’s selling like hotcakes—but lack the funds to do so? If so, building business credit as soon as possible is a good idea. You’ll put yourself and your business at a competitive advantage by leveraging business credit due to the increased purchasing power and growth opportunities.4. Access to exclusive perks
It doesn’t need to be said that there’s a considerable risk in letting your staff use your personal credit card. But with a business credit line, you can issue a business credit card specifically meant for your employees. But that is by no means the end of the perks of having your own business credit. With a business credit, you can also enjoy more streamlined expense tracking and better reporting tools for keeping track of your finances for auditing and tax purposes. Furthermore, having a proper business credit line can also serve as insurance and help protect you against fraud. This can save you a lot of headaches and stress in the long run. Still need more reasons to switch to business credit? View Westpac’s article here.
