No matter the business that you are in, in some ways, there are various attributes that they have. No matter the business you are in, it will earn you an income, have credit histories, and you have to file tax returns. Therefore, it is important as a business owner that you do not overlook the importance of a healthy business credit profile. When you are not in concern about how your business credits are, you fall victim to the many myths that go around about business credit. Aim to understand what is the truth instead of following through with these myths. In this way, you can review where your business credit stands for your business and take steps to strengthen your credit file. In this article, are 4 myths to know on business credit.
Myth 1: Small creditors give credit freely
Even though you can get business credit easily from various small creditors. This does not mean that small vendors, suppliers, and banks will willingly extend business credit as freely in comparison to big institutions or corporate banks. The truth is that the small creditors will submit your credit application to bigger corporations to get a final decision made in your application. Whereby, they will use an automatic scoring system in comparison instead of the manual scoring that most small lenders tend to prefer. Besides, the automatic scoring systems for business credit are preferable to the manual ones for business credit approval methods as they are similar to those that are in use for personal credit automatic scoring. Therefore, even when you focus to have business credit as you start. Have companies that help build business credit for startups to help you with your scores and profiles to get a good score for your business credit approval. there are many free credit monitoring services you can check from there.
Myth 2: You need a prompt payment history
Prompt payment history is vital for any business. However, the myth that for you to qualify for business credit you need all bills paid on time, is a belief that business owners should avoid. So, it is wrong as a business owner to believe that if your company is observing prompt payment, that its credit history is in good standing. Notably, it is vital to pay bills on time, but the good payment history will only favor you when creditors need to view your credit rating of how your business works and when you work with creditors that have to report your payment history to credit reporting agencies. So, you may not have a prompt payment history, but it does not necessarily affect you getting business credit.
Myth 3: Limited credit changes
Although your company is new or you do not expect as many fluctuations in your business credit report. This does not mean you should assume and not monitor your business credit profile. Large transactions as new business credit cards, new loans, and credit inquiries are some that many people assume, but others that affect your business credit report are not as obvious. As an example, small transactions as advertising accounts, new lease agreements, and insurance policy changes may cause changes in your business profile. Thus, do not think that there are limited credit changes as the only way to know how your business credit report reads is to monitor your profile.
Myth 4: Business credit terms don’t affect cash flow
The relationship between your cash flow and your business credit terms affect your business. However, many business people believe that business credit terms do not affect cash flow. Yet, just like with personal credit ratings, a business that has fair or poor credit will not receive interest rates and optimal terms. Therefore, if your business receives lower credit limits and pays higher interest, it will have a negative result on your cash flow. So monitor your credit profile as it will come handy to help you know what your business credit score is, and you will know how best your business will fair with lenders that you will approach successfully in the future.
In summary, the above business credit myths will help you turn to the truth and know how best to handle business credit issues. If in any doubt, it is best to consult companies that deal with business credit to get further information on the same.