When speaking on small businesses in the US, The Office of the United States Trade Representative stated that “Small businesses are the backbone of the U.S. economy, creating two-thirds of all new jobs in recent decades.” This illustrates the importance of small businesses, as well as the necessity to keep small businesses alive and thriving.
Many small businesses felt the weight of the pandemic on their shoulders. As a result, small businesses need to ensure that they are putting measures in place to protect their finances. One way for small businesses to continue to grow, and stay secure, is to build business credit. Business credit is important for a number of reasons.
Why Business Credit is Important
Separation
Maintaining and building business credit is a good way of facilitating a distinction between personal, and business finances. Many business owners invest a lot of their own personal savings into the beginning of a business. By separating personal and business finances, business owners can keep their own assets safe and secure. Similarly, building business credit may ensure that a business owner does not have to dip into their own savings. If the business needs a loan or investment, having separate finances, and good business credit can reduce the amount of personal collateral that is required.
Financial Stability
Business credit is important for financial stability because, as a business owner, you never know when your business may need extra finances. One bad month of sales could spell the end of your business. This could even be caused by factors out of your control such as a new wave of covid infections. In a scenario like this, a strong business credit score will allow your business to acquire a loan at favorable rates. This loan can then be paid back easily once your business is back on its feet.
Loans and Financing
Loans and financing are some of the best ways to facilitate growth for your small business. Acquiring a large amount of capital is very difficult for a small business. This is nearly impossible when your business credit score is low. A good business credit score will mean that you can acquire larger loans at lower interest rates. These loans can then be used by your small business to invest in the necessary equipment and infrastructure that it needs to develop. Additionally, acquiring financing for smaller expenses such as a new vehicle or piece of equipment will also be made significantly easier by a high business credit score. A high business credit score will mean that your financing will be more likely to be approved and it will be approved faster.
Better Terms With Suppliers
A high business credit score is useful for more than just acquiring loans and financing. It can also be useful for negotiating more favorable terms with your business’s suppliers. Your good credit score can be used as a bargaining chip with suppliers as they will more readily trust your business and its ability to pay on time. This could mean that your business can negotiate better deals with your suppliers. This would give your business more time to pay them or the opportunity to pay them less than what they would ordinarily charge. These savings and convenience factors can benefit your business tremendously.
As an additional bonus of good business credit, your vendors may not require prepayment. This would give your business more time to pay back your creditors and alleviate cash flow problems. As cash flow is such an integral part of small business operations, any chance at improving this vital aspect of your business is greatly appreciated. For information on how to build business credit fast consult The Really Useful Information Company (TRUiC)’s website. They have many helpful tips to improve your business credit both quickly and efficiently.
Final Thoughts
Business credit is extremely important for small businesses. It has a huge amount of practical benefits for your business. These are largely drawn from the ability to acquire finances and other goods and services at more favorable terms for your business. This could mean paying back a loan at a lower interest rate or paying back your suppliers over longer periods of time.
