Are you still using your personal credit for your business?
One of the most underestimated items you can have in your credit arsenal is a credit card in your business name. Many people do not choose to apply for a business credit card because they do not understand its positive long term impact on their Paydex or business score and therefore on their overall business image. They use their own credit to start the business and wait until they need to get a bank loan to try and get credit in the business name.
Even though a this type of card has more requirements compared to other types of credit cards, it can be very helpful if used properly. Using personal credit for early business needs wastes the early years when you should be building your business credit slowly and negatively impacts your personal credit by showing large debts on your credit report that are not identified as actually related to the business. Large balances hurt your FICO score.
Both of these types of credit are tightly tied together from the lenders perspective. It is critical to keep them separate. A good FICO score will help you get your business credit and other accounts. But credit for your business is not built overnight. It takes at least a year to properly build your business credit. If you apply for a card in your business name when you first create your business entity you will reduce the need to use your personal credit for smaller expenses, and you will start to build that good business reputation right from the start.
How is a business credit card different from personal credit card?
Basically, business cards are for business use only. The main difference is that compared to the personal card, this card will have a higher limit, usually $ 25,000 or more. You will also need to personally guarantee a this type of credit card, but that card will not show up on your personal credit report.
A business card helps your new business by extending payments while improving the cash flow. Depending on the card you choose, it may also bring a lot of automatic benefits. Business cards offer detailed spending reports and give quality customer service. It also provides many alternatives and numerous credit options for small businesses, like a line of credit. Customized company logos and access to instant cash are available when you access your account online. Most applications offer no fee for the first year and no pre-set spending limit or finance charges, and even free cash advance checks. Other offers include membership reward programs that enable the member to earn points towards travel, merchandise, and other rewards for the business.
It is important to learn all you can about how to build business credit properly so you can grow your business credit while protecting your personal credit.