Fight Hard To Establish Business Credit
Right after graduation, or maybe your starting a business while still in school, initially credit can be tough.
Here is an article I read that goes over the issues.
Does it ever feel like no one wants to give you credit when you really need it. But when your personal finances are going well, you are getting offers left and right? Welcome to the reality of getting business credit, and I will tell you right now it is much harder to obtain than personal credit.
Even though it can be frustrating to deal with lenders while you are attempting to obtain business credit, you have to understand their position. They have seen too many businesses fail so they have to be very selective of who they extend it to. Most business loans aren’t small, so that is a significant amount of money the lender loses if they don’t repay it on time. Even though they can sell the business to make up for it, this is a process that takes time.
You will be surprised how many people approach a lender for business credit without any real information to provide them. Sure, they talk about what they want to do and where they are going to put the business but they don’t have all the details. They don’t share information about the market for their business, the competition, overhead expenses, or any other details that will affect the success of their business. As a result they aren’t able to establish business credit.
This shows you are planning to run your business for the long term instead of just trying to make money fast. It also shows you have a good business sense and that you have realistic expectations about what running that business is going to require. A well written business plan needs to have an introduction, sections for all of the various issues, pictures if possible for the design of the business, and motivating summary that brings it all together at the end.
However, your business plan also needs to offer some insight as to why you want to own your own business. Don’t be afraid to add a few pages that talks about your skills and experiences you can use to operate the business. Let your passion for the type of business you want to operate shine through as well. Your business plan is the most powerful tool you have to convince a lender to give you a chance so make it a top priority
While business loans often have higher interest rates than personal loans you still want to keep them separate. I can’t stress to you enough just how important that is. Remember how difficult it was to establish your personal credit and protect it at all costs. Don’t fool yourself into thinking that you don’t need business credit because you do.
Even if you don’t have to borrow money for start up costs because you have enough saved, you will eventually need to pay for expenses you can’t cover out of pocket. Having a business line of credit that you can access at any time means you can make important business decisions without having to consult with a lender first. You will also find a business credit card comes in handy for small expenses, business dinners, and travel that has to be done for the sake of the business.
You need to be very careful about the scams out there, that prey on new businesses trying to obtain credit. If it sounds too good to be true it likely is so make sure you look into the details. Some of these scams take place online as the criminals have less of a chance of getting caught. Not all online lenders are bad. Be careful when you send them money to process your application or you can kiss that money goodbye. It has gone into their pocket and they are moving on to other business owners that are in your same situation.