How to establish business credit
June 23rd, 2007 | Establish Business Credit Articles
Establish Business Credit
A business credit is a useful tool in helping your business grow and flourish. But you have to realize that you have to pursue getting your own business credit. Getting one entails a lot of work; no one will just come to you with a ready made business credit line and drop it into your lap.
You can get a business credit from two main sources – from a bank or lending institution or from your suppliers. You will need to plan properly in order to get the establish business credit from any of these two sources. Remember that getting business credit can help in easing the pressure that is exerted on your capital investment so play your cards right in order to achieve your business credit goals.
In order to successfully establish business credit you will need to know how banks or suppliers assess the credit worthiness of an entrepreneur. What they usually do is to look at five crucial factors. These are:
Capacity to pay – this is one of the most important factors that banks and suppliers look at before they establish business credit for you. It is quite essential for them to know if you have the capability to pay back the credit. After all, they are also establishing the business credit not to help you but also to earn profits.
Business Capital – banks and suppliers will also look at how much capital you have invested into your business before they determine if they want to establish a business credit with you. The larger your capital, the more risk you have if your business folds. This assures them that you will be less gung ho with the business.
Collateral – Providing collateral will definitely make it more worthwhile for banks and suppliers to establish a business credit with you
Business Conditions – this refers to the general business environment or climate as well as to how the credit will be used. You will need to convince the bank or supplier that your business can operate optimally in the present business climate. You can even present your own plans in case the business climate becomes a bit negative.
Character – This refers to you, the entrepreneur. Banks and suppliers look at you as the face of the business. You have to present yourself impeccably. You should also present your credentials, educational background, and business experience as it will definitely help them in making their decision.
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