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Key takeaways:
- The best way to build good credit is to use credit responsibly.
- You can use credit to cover expenses, purchase inventory, expand operations, cover emergencies and provide general cash flow.
- Credit can be beneficial to your business, but there are a few things to avoid.
There are a lot of uncertainties in running a business, and access to reliable funding is one of them. A business credit line can give you access to funds when you need them most. By using your credit responsibly, you can build an excellent credit score that can help your business grow.
Here’s what you need to know about maximizing the value of your business credit line.
Why your business needs a line of credit
Helps you build credit for future use
When you use credit responsibly, it helps you create and build a strong credit history. Having good credit will serve you well when you eventually need to take out a larger loan for your business. You’ll be more likely to be approved and you’ll likely get better terms.
Helps you manage cash flow
Cash flow issues are often one of the biggest challenges for small businesses. A business credit line can help you fund daily operations, cover expenses, and purchase inventory ahead of demand.
Using credit to benefit your business
Responsible use of credit can be one of the best things you can do for your business, but there are some pitfalls to avoid.
Do:
- Pay off your balances on a weekly or bi-weekly basis.
- Negotiate the most favorable APR and terms you can.
- Get a separate line of credit for your employees if they need to charge expenses to the company’s account.
- Set different spending limits on specific credit lines.
- Carefully review your statements each month.
Don't:
- Skip a payment or pay your bill late.
- Exceed the recommended 30% utilization ratio.
- Let your balance build up over time, or you may find that your business is facing too much debt.
- Use the credit to pay for expenses your business can’t really afford.
