You know that bad credit comes with consequences. A rough score follows you around and makes it difficult to make significant financial decisions, like applying for a mortgage, renting an apartment, or buying a car. While you’re aware that poor consumer credit can be a long-time roadblock, did you know that poor business credit can be just as restrictive?
Why Do You Need Good Business Credit?
Much like consumer credit, your business credit score lets banks and investors know whether you’re a financial risk or not. A low score could tell them that you might not be a safe investment, that you could delay repayment — or worse, make them waste all of their money. Owners with bad credit often get denied essential business funding.
If you already have an undesirable score, you can skip the big banks and turn to an alternative funding company to get the financial support your business needs. It will give you an opportunity to pay for necessities like inventory and equipment. The company has several options that don’t meet rigid financial qualifications like high credit scores or large assets.
If you don’t need funding now, but will likely want it in the future, you should avoid the following mistakes to guarantee that you have a strong credit score.
Mistake 1: Mixing the Personal and the Professional
Using your personal credit card for business expenses is one of the biggest business mistakes that you can make, and you’ll see the proof on both of your credit reports. A multi-purpose credit card will create a bookkeeping nightmare, forcing you to go through every single purchase to check whether it was for the business or yourself. It’s better to keep it simple and stay organized.
Mistake 2: Playing It Fast and Loose
Giving your staff members free rein with the business credit card is a good way to put yourself into credit trouble. The next time that you open up your bill, you will wonder how the numbers piled up so quickly.
To avoid reaching your card’s limits, you should establish a spending policy at work and inform all of the staff members of these crucial rules. Consider stashing the card in a locked drawer to take away the temptation to swipe it any time a small problem crops up. The move could also protect you from employee theft.
Mistake 3: Ignoring the Card Altogether
Ignoring the card can damage your score, too. You have to use your business credit card in order to build up a good business credit score and prove that you are a financially reliable company. So, you shouldn’t put your card in a block of ice and only use it for emergencies. Use it on essentials that you know that you can pay off every single month.
Managing your business credit is all about balance. When you overspend and miss payments, you’re going to pay the price with an unflattering report. When you don’t use it all, you’re also going to see an unsavory rating. By finding a middle ground with your spending, you can get a top score.