The Building Blocks Of Corporate Credit
How is your business seen by the rest of the business world? How stable is your business? How can it withstand fluctuations in economy and for how long? These are very basic but very strong questions whose answers are directly influenced by what is referred to as ‘Corporate Credit’.
Corporate Credit, also called Business Credit, is a reputation that is gained and appointed to a corporation or business — not to a single person. This type of credit is important in setting up and upholding business or banking associations with prospective creditors, vendors, business partners, or even clients.
Credit ratings established by credit reporting agencies assign ‘credit profiles’ to businesses that are used by these creditors, vendors, business partners or clients to help determine their interest in investing in a particular business, through lending or partnership. This ‘credit profile’ is built on the basis of historical and current credit standing among other factors.
The first and foremost advantage of achieving a good business credit profile is cash savings. With a positive credit score, lowered interest rates for loan payments and leases will be made highly probable.
Apart from cash savings, establishing good business credit allows you to save time for the business, build credibility for the business, extension of cash flow, ability to meet and prepare for current and future lending needs.
Once your business is recognized with positive credit profile, the use of personal guarantees is decreased while business credit is built regardless of personal credit histories. This means more cash for the business, ease in asset acquisition, protection of personal assets, lessening personal risk from the business and non-requirement of personal credit checks.
Yes, it is not advisable for an entrepreneur to use his personal credit profile in place of corporate credit when growing the business. Not only could it lead to endangering of ones personal assets to fulfill debts concerning the business, but it also establishes a poor rating on the business credit profile. It makes the company appear inadequately funded and therefore, unstable.
What measures corporate credit profile? There are three basic elements. First and foremost is ‘assets’. This element directly impacts the company’s worth, thereby making it the most important and vital factor in the determination of a corporate or business credit profile.
The second is ability. Can the business settle the debts? What are the past payment history? How much has been lent to you in the past? And, lastly, the ability of the company to stay in business given external factors and trends is also an important factor. This is sometimes referred to as acumen.
So, how does one work towards an excellent corporate credit profile?
First of all, it helps to deal with companies who are rated by firms regarded as ‘Business Health Indicators’ like Experian, Dunn and Bradstreet (D&B) Client Checker, Business Credit USA, Equifax and FDInsigh. Each time you settle payments on time with companies being rated by those mentioned, your credit ratings are noted.
Furthermore. Keep track of your debt. Maintain a good personal credit standing. Lastly, seek expert advice. Let the experts lead the way to top corporate credit standing.
E. Linares is Chief Visionary Architect at Commercial Magnet:: the new face of the online lending marketplace where borrowers and lenders connect. CommercialMagnet.com is the entrepreneurial platform taking business owners from start to funding. Find out how a Venture Capital Loans or Commercial Loans can help fuel your business at http://www.commercialmagnet.com.