5 Credit Mistakes to Avoid When Looking for Business Financing
Unfortunately, your credit score is a deciding factor in most big financial decisions, and this is especially true when attempting to open or expand a business. Therefore, it is crucial to ensure your credit integrity and manage your debt wisely, so that when a need for business financing arises, you can rest assured that you have the best opportunity for loan approval. That said, there are at least fivecredit mistakes most young entrepreneurs make when they are starting.
- Lack of Knowledge
There are so many opportunities to build andestablish your credit, but you have to be aware of those opportunities first. Also, keep in mind that business credit isdifferent from personal credit. A business may get funding with a score of only 180, while an individual may need a 580 or higher.
- No Credit
A personal credit score requires minimal effort to establish, but a business score must be soughtafter. You need to ensure that every transaction is recorded, that every aspect is presented, in your business credit history, or you risk your companies score staying low or worse non-existent.
- Personal Credit Card Use
Another common mistake for young business owners is the use of personal credit cards to fund their business. Granted, in the beginning,it may be OK to use personal credit to make smaller purchases, but once the company is up and running,you should look into getting a business credit card.
- Unregistered Business
While it may seem like a simple oversight, a failure to register your business with the state can have severe ramifications foryour business and its credit score. If a company is not recognizedas a business, then it cannot even begin to establish a credit history. Make sure to register your business as soon as possible.
- Avoiding Credit Card Perks
While a small issue compared to the others on this list, companies that avoid using corporate credit cards are failing to take advantage of many of the perks, like cash back, savings and airplane miles. Essentially, credit cards help establish a credithistory, andmany cards basicallypay you for using them. Use them.
Your credit score, referring to both your personal and business scores, is essential for business growth and development. You may think that being completely debt free is the best way to manage your business, but some manageable debt demonstrates trustworthiness, especially when handled responsibly.