Business

5 Ways Business Credit Is Advantageous For Startups

Even though a business’s business credit score can quite literally ‘’make or break’’ it, reports by the National Small Business Association have shown that an astonishing number of small business owners continue to (inconveniently) rely on their own personal credit card and personal loans to pay for all of their business’s related costs.

According to the NSBA, approximately 27% of businesses surveyed within the U.S claimed that they were not able to obtain the amount of funding that they needed. From that 27%, roughly 1-in-4 businesses revealed that lack of funding was the most important reason for them not being able to expand and grow their business as they had planned. 

This means that taking the necessary steps to adequately build your business’s credit score can go a long way in allowing you to: protect your personal assets, obtain adequate capital in the future, and grow your business in a sustainable and profitable way. 

Below we will discuss the most important ways that Business Credit can affect business startups in 2021 in a U.S context

What Is Business Credit?

Business credit (also known as commercial credit) is the ability of businesses to adequately borrow capital from certain creditors- such as banks and credit unions, for business-related expenses (such as equipment, or to launch new initiatives that drive business growth and expansion).

This can be very important for business owners, as it can allow them to obtain much larger loans than they would be able to through traditional credit card applications or personal loans. 

The term business credit can also be used to describe any situation where one business issues credit to another business; for example, a food vendor may choose to allow a certain restaurant to buy all of its ingredients ahead of time (also known as trade credit). 

Importance of Business Credit

Building a strong business credit score adequately is extremely important- particularly for small businesses, as it can play a pivotal role in determining whether a company will be able to obtain adequate financing to expand (and sustain profitability) in the future or not.

Business credit additionally allows companies to significantly increase their monetary value- as business credit is considered an asset when calculating the total value of a business. This is especially the case when considering that business credit can be transferred when a business is sold- a fact which future owners will undoubtedly value greatly. 

Similarly, a poor business credit score can dissuade a plethora of sellers, and will likely ‘’condemn’’ a business’s long term growth aspirations as a result of an inability to attain a suitable level of capital. 

Obviously, relying on business credit also protects business owners’ personal assets (and credit score), as they no longer have to jeopardize these in the process of applying for personal loans and credit cards for business expenses. This involves two significant advantages:

  1. It increases the total amount of capital that can be borrowed- this is because personal loans and credit cards (generally speaking) have a much lower borrowing limit than a business line of credit.
  2. It allows businesses to build their business credit report (increasing their financial assets and consequent value) from relatively early on.

TRUiC’s Top Choices

The Really Useful Information Company (TRUiC) has recently provided their current best net-30 vendors who report directly to Dun & Bradstreet- one of the most ‘’cemented’’ business credit bureaus in the U.S

These include: 

  • Uline.com
  • Quill.com
  • Office Depot/OfficeMax
  • Grainger
  • HD Supply
  • Shirtsy

Uline.com was TRUiC’s first choice for a variety of reasons. For one, the company offers a variety of products which are tailor-made so as to help businesses in particular. Moreover, Uline reportedly has one of the most responsive, polite, and knowledgeable customer service teams- especially compared to some of the other companies on the list. 

If you are interested about all of TRUiC’s choices you can read more here.

A Final Take

All in all, building a robust business credit score is undoubtedly extremely important for startups. If you are currently an entrepreneur with plans to expand your business significantly in the future, you should definitely start taking the necessary steps to build your business’s credit from now.

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