Building business credit is vital to small business success. The main reason that small businesses fail is lack of capital. There are many reasons that small businesses fail, but the lack of access to cash is the number one reason. A small business can lose customers when they don’t have access to cash for marketing materials, additional equipment, even to pay an employee if they get busy unexpectedly.
Typically, people who open a small business finance the start up costs with credit cards. They may have recently lost their job and need a new source of income fast. Financing a small business using personal credit seems like a good idea at the time. When they start building business credit, like applying for business credit cards without personal guarantee, they realize they shouldn’t have used their personal credit cards to finance the business.
Building business credit starts before the small business even opens it’s doors. Obtaining business credit cards without personal guarantee is not an option right away. There is a right and wrong way to start building business credit. Do it wrong, and your small business will not have the credit it needs to keep operating when times get tough. Do it right and you won’t have to worry about unexpected expenses that always seem to come up when cash is in short supply. Don’t let your small business fail just because you didn’t start building business credit until it was too late.