Whether you are starting a new company or running an existing company you need to build separate business credit so you can get small loans when you need it. Having separate business credit profile helps to limit your personal liability and protect your personal assets.
Most people use their available limits on their cards and savings in their bank to start-up their company. When they get loans on their personal name, not only they have to give personal guarantee for the loans, they also use up all available personal limits on their cards and lower their personal score in the process of starting their new company.
You may be running a company for years but your company may not have build paydex score at all, and every time you apply for loan you have to give personal guarantee. Now days most lenders are looking for corporate credit score before they approve any loan to the company.
Most business reporting companies have setup a scoring system which is used by banks and many lending institutions to approve or decline a business loan. Agencies like, Experian, Equifax, and Dun and Bradstreet have developed a scoring system which are used by banks, lenders, consumers, and other businesses to determine the rating of a particular company.
How to build corporate credit is a step by step process. You need to have the right corporate structure. Sole proprietor will not be able to build business credit. The company owner needs to understand the difference between trade and business credit. How and where to get trade lines is very important element in building corporate credit. Once you have established strong corporate credit rating for your company, you increase your chances of obtaining loans.
If you have bad Fico score, you can learn how to build corporate credit without using your personal credit. Personal and business credit are created in totally different database of the bureaus, they are not linked to each other. To get the best result you need to have strong corporate and personal credit. If you personal Fico score is poor you can start repairing it while building business credit score.
As a smart company owner you need to establish separate corporate credit. Instead of applying for loans in your personal name, start applying loan under your corporate name.