Business Credit: Can you start your small business without it?

Absolutely! Will your business need it? Eventually… Yes! In terms of startups, even if we plan our budgets to the finest minutia, and have the cash to get going, there’s always something unplanned that pops up. Be it resources, or repairs whatever it may be is a NEED and not a want. Now your budget is now blown up what do you do? Leveraging credit provides you access to funds to cover those incidentals with the only impact being an added expense to your overall budget. *With the right planning and careful spending, that expense can be short-lived.

Business credit also provides you the ability to separate your personal expenses from business expenses all while reaping the benefits that come with business credit. In time business credit can help you:

• Get better rates for financing which influences your business’s growth.

• ***Increase your personal credit score as many expenses that you incur on day to day basis in your personal life can be paid by your business credit, thereby allowing you to lower your personal credit utilization. ( See a qualified tax professional to find out what expenses qualify )

• **Benefit from the perks offered by business credit cards not offered to personal card holders such as; better points, cash back, miles, and discounts.

  • *Business Tip#1: While you’re paying down the debt, think of how to turn that monthly expense into an investment opportunity. It’s already being recorded on your books as a cash outflow, why not transfer it into something that increases your bottom line?

  • **Business Tip#2: Use the points, discounts, and cash-back to lower your monthly business expenses.

  • ***Business Tip#3: Use the points, discounts, and cash-back to lower your monthly personal expenses. This tip ties in with my point about using your business credit, thereby allowing you to lower your personal credit utilization. ( See a qualified tax professional to find out what expenses qualify )

WHERE DO YOU START?

• Nav is a free, simple way for business owners to manage and leverage their financial data. Free to use but of course if you want the perks you have to enroll in one of their plans. The site allows you to monitor your business and personal credit profiles in place and analyze your business cashflows. Based on the data they collect they offer suggestions for financing that suits your needs. We went with a subscription because NAV at the time worked like a vendor account that reports your history and utilization to the credit bureaus and Dun & Bradstreet. If you decide to subscribe make sure you check on that perk as businesses change processes all the time.++

• Vendor accounts are great for building business credit because many of them don’t require a PG ( personal guarantor) in order to open an account so there are no worries about the account hitting your personal credit. They also report to the credit bureaus. The best accounts to find are the ones that are geared to purchases your business does the most. For example, if you are in transportation find a Net 30 or Net 15 fuel card. The 30 and 15 are the number of days you have to pay the account once it’s invoiced. Net cards are available in a number of other industries such as office supply and industrial products to name a few. That said be careful with the Net cards because your ability to pay off on time within the day range is how you build credit with these types of accounts.

• Lastly, many small businesses get their start with Capital One. We’ve found they are the easiest credit card to open. Even if your personal credit isn’t up to par. At the very least Capital One also offers the ability to open a secured credit card. With good history it’s quite easy to eventually open an unsecured line with them or another card of your choice. Just remember don’t be discouraged we all have to start somewhere.

We hope that this information has been beneficial to you! Thank you for reading!

We are small business owners and not financial advisors. This information was provided free of charge with the intent of helping you based on our personal experience and research at the time of publishing. Please do your due diligence and research this information and more for yourself and consult a professional financial advisor before making any that could have major impacts on your financial well-being.

++In full disclosure, we are an affiliate and/or customer of these products and services