Anyone with any business experience at all will tell you the hardest part of getting a business going is creating, managing, and sustaining cash flow. Businesses fail when their bank accounts go to zero, period. You might have the best product in the world, but if you can’t keep your cash ahead of your expenses, you’re done. That’s why it’s so crucial to build corporate credit as fast as possible. By the end of this article you should have a little better idea of how to establish a high corporate credit rating.
The first reality of becoming a creditworthy corporation is that older corporations have a much easier time getting banks to lend them money than younger entities. That’s pretty logical – if you’ve been in business less than a year that’s a pretty big indicator to a lending institution that you may not be around for the long term to keep payments on business loans current. So, this is the part of building corporate credit that really isn’t possible to short-cut…unless you’ve got plenty of cash on hand. One thing you can do is purchase what’s called an aged or “shelf” corporation that belonged to another business, and therefore has been on record with the state for longer. Essentially you can buy the age of the previous business. The tough part is it takes cash, and if you had a lot of cash you wouldn’t be looking for fast ways to build up your corporate credit rating would you?
The best advice I can give you when it comes to getting your business’s credit rating up is to begin immediately and start applying for small lines of credit under your corporate name, as opposed to your personal name. If you can get even one small credit card in the your corporation’s name you stand a good chance of getting bigger loans within a few months, or possibly a year. Another benefit of applying for lines of credit in your corporate name is that your own negative personal credit rating (if it is, in fact, a negative rating) won’t slow your ability to get your corporate credit score higher.
Visa, American Express, Chase, and Bank of America are just a few of the major lending institutions who are eager to have new business owners establish their corporate credit history with small business credit cards. Check out their corporate websites to learn more about their individual offerings.
In an ideal world you’ll never need to borrow money as you build up your small business. Hopefully you’ll be able to pay yourself and buy some growth just using the business’s own earnings. Unfortunately most businesses hit several major stumbling blocks during their first couple of years, having credit lines might be the thing that saves your business from failing before it ever really starts.
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