A favorable credit score will permit you to take advantage of financing products offered by lenders.
If you already have acquired a positive credit record, lenders will likely authorize a substantial loan.
The loan may be accompanied by a repayment schedule tailored to your circumstances and a lower interest rate.
A negative credit rating, however, will adversely affect your lending status.
Your rate will require improvement if you want to construct business credit.
You may either remedy this situation yourself or retain a professional to restore your credit rating.
Until your score is strengthened, you will not be able to begin the process of obtaining business credit.
Once you have acquired a sound credit rating, you can start to earn business credit.
Usually a business can expect to build a good rate within 12 to 24 months of initial startup.
You require a credit identity before you can establish business credit scores.
The two best options to accomplish this is to launch your business as either a corporation or a LLC.
Lenders are more apt to permit you to acquire loans sooner if you have started your business as either of these entities.
A credit record through a credit agency or Paydex needs to be established as well.
A credit agency tracks, rates and scores your credit transactions.
These records determine the status of your credit rating.
Financial institutions will access your credit report feedback when you apply for financing.
Paydex companies, such as Dun and Bradstreet, keep records of the promptness of your business's credit bill payments.
Scores are assigned from 0 to 100.
If your score is in the high range, your loan application is more likely to be approved by financial lenders.
Once your credit rating has been created, you need a loan to enable you to build business credit scores.
You have two options available.
The first choice is a secured loan.
This means the lender will require collateral in the form of assets or property as loan security.
The advantage to this form of loan is you will be able to borrow a substantial amount, relative to the value of your collateral, and be charged a lower interest rate.
The second choice is an unsecured loan.
Collateral is not required as security, however, the lender will be more stringent with repayment schedules and charge a increased interest rate.
This option is suitable when the business owner does not want to risk forfeiture of their personal assets if the business venture is unsuccessful.
There are other types of credit available for the business owner.
These are also advantageous in terms of building business credit.
The most common are: 1.
Business credit cards: These types of credit cards have lower APR.
Interest rates, subject to the amount of credit charged per month, are variable.
Business credit cards can be worthwhile because of these attributes.
2.
Short and Long Term Loans: A specified amount of money may be borrowed from a lender to be utilized for any requirements you deem necessary.
These loans have fixed interest rates.
Repayment schedules are determined by the amount of money borrowed and may be anywhere from 5 to 10 years.
3.
Credit Lines: Lines of credit are usually available for businesses which have operated for at least two years.
The lender will provide you with a fixed amount of credit which you can access as needed.
Much the same as credit cards, the interest rate depends on how much credit you have used.
As you pay down the credit, the interest rate will reduce accordingly until the credit is repaid in full.