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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Why Good Credit is Vital for Any Business
Over recent years, many people have come to learn just how important have a decent credit score and history is. With many people having fallen behind with payments on debts and bills and many others overburdened with debt, the number of people with bad credit has rocketed. This has made it difficult for people to get essential finance such as a mortgage or car loan. In some cases, it even affects their ability to rent a property or get a particular type of job.
One thing to remember is that the importance of good credit does not just apply to individuals. Businesses also need to have good credit in order to avoid a range of issues in the future. As is the case with individuals, businesses may struggle to get additional finance if their credit score is low and this is why you need to ensure you maintain good business credit.
Avoiding difficult financial situations
There are many instances when businesses find themselves in financial difficulties and any cash flow issues can have a major impact. Small businesses in particular tend to struggle when it comes to cash flow, which means that they could be left without the ability to purchase stock or other essentials as a result of having no money. If the business credit score is low, the chances of being able to borrow the necessary money are much slimmer and even if you do get some form of credit you will pay a far higher interest rate than you normally would.
Of course, there are options available if you do have damaged business credit. For instance, you can look at getting a credit card for bad credit or a sub-prime loan. However, as mentioned above the amount of interest charged on credit for those with a low credit score means that you will pay far more for your borrowing than someone with good credit. When you are running a small business and you are on a tight budget, this is an additional payment that you can ill afford. By maintaining good business credit you can save yourself the expense of having to go for high interest finance.
It is important that you separate your personal and business credit accounts so that one does not impact upon the other. In addition, you should check your business credit score on a regular basis so that you know if and when action needs to be taken. This also enables you to keep an eye on the information in the report to ensure that it is up to date and accurate. As a business, you need to also ensure that you make all payments on time so that you do not get black marks on your business credit file.
If your business credit is damaged, it is important that you take steps to try and improve this so that you are not tied to high interest finance for years to come. There are various steps you can take to improve your business credit and once you start to see improvements you will be able to enjoy better value on your borrowing.
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