Business Credit is the ability to obtain finance under the business name. The goal of Business Credit program is to develop a credit profile using EIN number rather than an individual’s social security number. This separates owner’s personal credit from the business credit. Developing a credit image for the business conserves cash and building a corporate credit profile can keep the company out of “no credit / high risk” and “high interest” categories, thereby saving money.
Our program will establish your credit identity with various reporting agencies. This allows for more credit to be achieved as the enterprise grows. This reduces the business owner to use his personal credit to run his business.
Advantages of Business Credit:
· Helps protect the personal Credit Score.
· If personal credit is used for business purposes and the business fails, the risk of losing everything is more.
· When personal money and assets are used for financing in the business, the personal credit is damaged as getting finance requires personal credit check and every time a credit check is made, the credit score takes a hit.
· It saves time and money of the entity
· Meeting the current lending needs
· It allows the company to be prepared for any future lending needs
· Have cash in the business when it’s needed
· The business will be able to extend the cash flow
· It helps in lowering the interest rates for the company
· Helps building credibility for your business
· Use the ultimate leverage i.e.; Other People’s Money
· Business credit is tax deductible for the entity
· Borrowed money is not taxable for the company
Types of Business Credit:
There are two different types of “Business Credit”
- Lines of credit with individual vendors i.e., vendor credit or trade credit– This is the most common, easiest to get & therefore the most talked about such as the credit associated with a particular store like an office supply store.
- Cash credit – But for investments that really matter for your company’s growth you need access to cold, hard cash – that you can spend when, where and how you want.
Steps involved in Business Credit Program:
- First step is to check business compliance with the credit markets and build a business credit profile.
- Registering with the Credit Bureaus and other relevant databases
- Once business credit is established, the business or Corporation is given a grade or rate by the various rating agencies
- The business starts receiving lines of credit from credit grantors
- Access the list of banks, companies, private lenders that provide credit lines
- Work for various ways to grow the business long term.
ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc. Contact ICS today at 203 437 4083 , e-mail – firstname.lastname@example.org, or by accessing 24/7 chat page on www.mybizfiler.com.
The contents of this post are personal statements or opinions expressed by Madhavi Chalasani, Asst Manager of ICS, Inc. who has written the article. They must not be construed as financial, investment or taxation advice.