Your Business Needs Its Own Credit, Too

One of the temptations of starting your own business is that it is easy to use your own personal credit to get things going. And while you may need to use some of your personal assets to get things up and running with your business, the fact of the matter is that your business needs its own credit, separate from yours.

Some Protection from Business Debt

When you separate your business credit from your personal credit, you are protecting your personal assets to some degree. In many cases, creditors can’t come after your personal assets for the repayment of debt that your business owes. It is important to note, though, that there are cases in which a business owner is personally responsible for business debt, so you should research the matter thoroughly. However, generally, as long as you have your business organization set up in a way that you are two separate entities, you have some protection for your personal assets when you keep your business credit and debt separate.

Ability to Get Loans

The chances that you will be able to get a small business loan increase when your business has an established credit history and score. You can build business credit by getting a credit card in your business name, by registering with business credit reporting agencies, and by asking suppliers and creditors to report to the business credit bureaus you are registered with.

Building a good reputation now can mean a better chance of getting a loan for expansion, or some other purpose, later.

Earn Rewards and Perks

It is also worth noting that you can get rewards for your business spending, reducing your upfront costs. Business credit cards can help you earn points that can be redeem for travel and merchandise. There are also some business credit cards that come with perks related to supplier networks. Additionally, some business cards come with higher limits and more flexible payment options than what you would see with personal credit cards. This means that you have a bit of an advantage when it comes to paying on your business card.

Allow Employees to Use Credit

If you plan to grow your business to include employees, it may be that at some point you will need them to apply for a loan in your place, or use a credit card for business expenses. Having business credit means that it is your business that is being evaluated – and not an individual. This means that your authorized representatives can accomplish financial tasks for the company as well as yourself. This is especially helpful in terms of using business credit cards for employees who travel on behalf of the business, or purchase supplies.

Bottom Line

It is usually a good idea to keep your business finances separate from your personal finances. And this includes building credit. Your business needs to establish its own credit, separate from yours, if it is expected to thrive in the future. Start now to build your business credit, and keep it apart from your personal credit.