There are studies stating that 89% of the millennials choose the kind of job that allows them to work when and where they want to over the traditional 8 to 5 office schedule. This data supports why the new Generation Z or famously known as the Millennials are divulging more and more into entrepreneurship compared to the last generations – Generation X, Baby Boomers, etc. They prefer this over any kind of work that restricts them from being free, gaining unlimited income, travelling, and spending time with their family. Millenials have strong characters and personalities. It is the most studied generation because they are fully immersed in the technology world that allowed them to form their personal identities and penetrate the world of politics, social and cultural issues.
Through the continuous development of technology, it gave businesses a new avenue that aspiring entrepreneurs can use as their playground. Startup companies across the world have emerged 5x as many for the past 5 years and most of its proprietors are people whose age ranges from 25 to 35 years old.
Millenials are vocal but impatient and demanding too. They are accustomed to getting everything done, skip steps if necessary with a few taps and clicks on their smart phones. Sadly, you cannot do such if you want your business to become successful. No one can. Though times have changed, the game is still the same for small businesses.
In business, you will encounter things that will teach you to be a better entrepreneur than yesterday. Lucky you, I am about to give you a tip for free that will make your business last. As you read this text, you will discover a financial tool that will help you with just that in a few and easy steps to follow.
You as entrepreneurs must be able to learn how to maximize advices that can strengthen your company and a sample of that is something called business credit. Every business owner must be knowledgeable of how to establish and use a business credit as it gives a huge positive support – if taken cared of right, in the long run, as your company grows. On the other hand, business credit when not done right can weaken your potential to grow, expand, and succeed. Even without these long term plans, small business owners must see to it that this financial tool should be taken accounted for because it comes in very handy in times of emergencies.
You will see the overview of a guide that will shape up your business without breaking a sweat. In this content, you are to find out a key that smart entrepreneurs do to keep their businesses in the game, and that is by using a business credit.
First order of business is to identify what a business credit is, the importance of business credit and how to build a business credit for small businesses. I will not keep you waiting any longer, let us hop on that now.
The Credit That You Didn’t Know You Need
A business credit is a financial tool that measures your capabilities in managing your money. Think of it as a scoresheet. If you handle your company’s money by practicing punctual payments; updated and clean financial record; and healthy financial habits, the better chances of receiving a good business credit score in your credit file.
You are maybe wondering what a good business credit can do for you. Do not worry as you will find out in a few scrolls.
Having a good business credit can do wonders for businesses. A good business credit serves as a supporting document that tells money lending companies and banks that you are a good payor. Hence, it convinces these institutions to approve your business loans faster and saves you from the trouble of getting your loan applications denied. Not only does it become helpful during these times but it also allows you to receive lower interest rates, convenient payment schemes, and flexible loaning options from the banks. Learn more about how to improve your business credit by following this 5 easy steps.
Small businesses plan for their growth ahead of time. Strategic planning is one of the key points to make a successful company and having a good credit score is needed to be taken into account. Landing new investors is a way to grow your company. You can attract them to invest in your business by showing that you have an excellent credit score giving them the impression that you are a good business owner. Your investors should also submit a report about your good credit behavior to trusted credit bureaus as this is also serves as additional support to your file.
On the contrary, poor credit score reflects a bad image towards your company because it means that your financial habits are poor. This negatively affects your company’s reputation. Once you decide to apply for business loans intended for financial emergencies which usually happens in businesses, chances are your application would be denied. So how do you build business credit for small businesses? Read further to gain insights how you can establish a healthy business credit.
How To Start A Healthy Business Credit?
1. Establish a company – There are several ways to do this. You can start by creating an updated webpage since most of researches are done through the internet. This will allow people to know that you have an existing business. Make sure that your products and services are included and well presented in the website. Adding your company details, address information – could be your home or office address, and contact number builds your credibility so it is important that searchers can view this easily.
Setting up a business bank account and applying a tax number are other aspects that must also be followed. Your company’s tax number will be provided by Internal Revenue Service. Once you obtain this, it means that your company is legally registered as an entity that engages with trade and other similar activities hence, is obliged to pay taxes.
You will need this Employer Identification Number or Tax ID to create a business bank account which is essential to be eligible for business loans. You can also choose to deposit and withdraw your company’s cashflow from this bank account.
2. Pay on time – Deadlines are made for a reason. Start ups or small businesses must practice this early to make it as a habit. Paying on time is important because it means that you are able to manage your business finances well. You are keeping an eye on your deadlines and making sure they are met. Your capacity to pay on time greatly impacts your credit score so monitor this well. It takes effort to build an outstanding credit score and one of the efforts you can do is to pay your debts, balances, vendors, clients on time.
3. Credit bureaus – Not all banks report trade information to credit bureaus. Make the initiative to enroll your company to well trusted credit bureaus – Equifax and Experian to name a few. Credit bureaus work side by side with banks to determine if you are qualified for a business loan. The role of the credit bureaus is to monitor, consolidate, and keep your business credit file updated. It is significant to put your business transactions recorded for easy monitoring. This way, you can immediately rectify disputes, improve on the areas you are weak at, or resolve pressing matters.
4. Establish trade lines with vendors – Relationships are essential in making a small business grow. By establishing healthy trades lines with clients and vendors, you build rapport with your partners. Encourage your suppliers to report your good credit behavior to credit bureaus as it will hasten the improvement of your credit score. But this is not only about your credit score, your company can also benefit from this such as by getting better deals, convenient payment terms, better cashflow.
5. Keep your records clean – You do not want your credit record to be damaged by irresponsible business decisions. Be careful in engaging your company with businesses or transactions that are questioning. A tip that you can follow to keep your credit file spotless is to separate your personal expenses from your business expenses. This brings you back to number 1, establishing a company. This is to avoid reflecting your personal financial missteps to your business credit records and vise versa.
6. Get business credit cards – This is a good exercise to manage your expenses. Business credit cards are like personal credit cards that allow your company to purchase goods or services and pay later on. Getting this means you are following a payment schedule that must be strictly met. Experts highly advise to only use 30% of your credit limit to maintain your balances low and keep a favorable payment terms. Your behavior and performance on how you use your credit line are reflected on your credit score so keep this at bay.
Small businesses have a lot of potential to grow. You just have to manage your expenses and operation well. Through these guidelines, building small businesses’ credit score will be a breeze. Every step is as important as the other so make sure to keep everything in mind.