All Businesses Need Credit

Business, Financing.

The truth about building your business credit - all businesses need credit. There are different types of credit you' ll develop over the life of your business.

And the process of building that credit starts in the very beginning of your businesses journey. - some of the forms of business credit include secured credit lines with your bank, vehicle leases or, unsecured credit cards loans, and equipment leases, supplier credit lines. And here is where your problems may begin. Each of these forms of credit will come with a myriad of documents for you to sign. You see your business whether you realize it or not becomes a living breathing entity in its own right. As a sole proprietorship your social security number would be used in which case your business is an extension of you. If it has been incorporated it is issued an EIN or employer identification number.

As a partnership your business is an extension of two people. - they say that one advantage of incorporating your business is that you are given protection against creditors should the business default on a debt. And just like you needed to start somewhere to build your credit so to will you business. Well this is true to some extent but it' s not really the whole story. Because just like you had to start somewhere it starts with nothing and has to earn its own credit rating. You see sometimes your business needs a little help in developing its own credit history.

This is where the problems begin. - whatever it was you might have needed a cosigner because you didn' t have any credit yet. Think about when you made your very first significant purchase in life. Well because your business doesn' t have any credit or it' s not well developed yet lenders want a cosigner for your business purchases too. No big deal right! They want someone to guarantee that they will be paid. Hey your business is going to be a huge success you can already taste it!

So sure you' ll cosign, where' s a pen? - and your business needs things. Not so fast. Even if your business is forced to declare bankruptcy the creditors can come after you if you have given your personal guarantee. Because once you sign those papers you are now responsible for that debt personally and just because your business is a corporation doesn' t mean you' ll be protected if something goes wrong. And any loan that you take out whether it is an auto loan or a credit card that is unsecured the creditor will want that guarantee before they will give your business the loan. This is why you need to carefully consider every business decision you make that involves credit.

When they consider whether to give your company credit they are going to look at your credit history just as carefully as they will look at your company' s. - because it may not be just your businesses credit and finances you are risking but your own. And none of us wants to have to go that route. If your businesses creditors are forced to come after you then personal bankruptcy protection may just as well be in your future too.