Why is it important to build business credit?

While you may have excellent personal credit, you won’t want to put a loan for your business in your name for liability reasons, as you could become responsible for your business’ debt. There is always a chance that your business could hit hard times, and if your business cannot repay the loan, you don’t want that debt reflected on your own personal credit report. Not to mention in some extreme cases, the creditors could go after your personal assets if you filed the loan in your own name. Therefore it’s best to build business credit, and then apply for business loans with your company’s credit report instead.

The better your business credit the more financial opportunities your business will receive. For one, if your business has good credit history, lenders will be more likely to loan your business money. Not only will lenders trust you to repay them, but they will generally offer you lower interest rates than if your business had bad or no credit history. With access to loans, your business can borrow money to invest in a new product or electronic equipment, which it might not otherwise be able to afford out of its own pocket.

In the same way that lenders won’t mind engaging in business with your company, investors and partners may be more inclined to invest in your business as well. Your business’ credit score will prove that your company is reliable.

Additionally, good credit creates a safety net for your business. You may not need extra money now, but what if sales drop next month? Can you still pay your company’s rent? Will you have enough money to cover your employees’ payroll? If your business has already built good credit, then your business should have no trouble borrowing money during a financial bind.