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Are you new to the business world? Are you aware of how your business credit affects your business? This article will discuss the most common myths about it and the truth behind them. Let that be your guide in determining what really matters and what doesn’t about your business credit.
Myth #1: Small business entrepreneurs or home-based business owners don’t need to be concerned about the status of their business loans.
Small businesses may deal with small business lenders but these lenders look at your credit profile in exactly the same way. Lenders of all types—whether large corporations, major banks, small lenders, even personal lenders—all determine the creditworthiness of a business through its credit profile. Every time you apply for a business loan, your potential lender will take a look at your credit history, regardless of the size of your company.
In fact, most financial companies today process loan applications with the help of an automated system. With this system, the decision to approve or deny an application is based on the business’s credit score. If it fails in the cut-off, then your application will be rejected immediately. Therefore, all business owners should pay attention to how they maintain their business credit history, whether they are managing a large corporation or just a small business.
Myth #2: There’s really no need to check my business credit profile that often.
All transactions you make between suppliers, lenders, investors and insurers appear on your credit report. Business credit reporting agencies update their files daily, and you’ll want to make sure your own report is accurate. Just as you need to check your personal credit report regularly to make sure all the information included is correct, the same applies to your report.
Myth #3: New start-up businesses don’t need to worry about their credit as much as long-standing businesses.
As we’ve said, size doesn’t matter when it comes to building excellent credit. Similarly, even if you have just started, it is a good practice for you to closely monitor your credit profile. In fact, you should be very interested in monitoring your credit report when you are in the early stages of establishing your credit.
Myth #4: Your cash flow has nothing to do with your business credit status.
When you apply for business credit or business loan, your approval depends on how good your business credit profile is. Even if you get approved, the interest rates, credit limits, and terms that lenders and insurers extend to you are all dependent on your business credit profile. Certainly paying for lower interest rates, getting higher credit limits and enjoying certain financial benefits that are only offered to businesses with excellent credit will affect your business cash flow.
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