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A
good credit rating can make or break you personally. Likewise it can make or
break your business. Often small businesses run on personal credit lines.
Keeping your and your business’s credit rating in good standing is
important for operations, growth and development.
When
lenders look at your business, they will consider the four C’s:
1.
Condition of business. Are your industry and your company
profitable—or likely to stay profitable? How long have you been in
business and what has the condition of your business been?
2.
Character. What is your credit history, your experience in your
company’s industry, your ability to manage a loan? Has your business taken
a loan in the past? What has the payment history been? Have you defaulted on
any loans?
3.
Capacity to repay. Is your projected income sufficient to make a profit,
maintain healthy cash flow and pay off the loan? Do you have sufficient
sources of income?
4.
Collateral. Do you have enough assets or collateral to sell if necessary
in order to repay the loan?
Additionally,
lenders want to see your business plan. It does not need to be your
full-length business plan, but it should cover what your business does, what
is your competitive advantage, what your projected earnings are and when you
intend to repay any loans.
Be
sure to separate personal and business expenses. Establish company
credit with a credit card. You can use a certificate of deposit as
collateral or apply for a secure credit card if you are applying for your
business’s first credit card. Pay company purchases with a business credit
card, not your personal card.
It’s
just as important to keep your company credit cards in good standing as it
is to keep your personal cards. Avoid spending to your maximum and
pay your accounts in full and on time.
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