Business Credit Myths

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Business Credit Myths

Published By Credit Suite at December 30, 2015

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In some ways, a business has many of the same attributes as an individual person. Businesses earn income, file tax returns, debtors are paid, credit is used for the business, and many businesses have credit histories.

Still some business owners overlook the importance of a healthy business credit profile and score or don’t know anything about business credit all-together.  Because of this many business owners start believing the myths surrounding business credit instead of the real facts.

One of the myths about business credit is that the credit isn’t real credit with real merchants, or creditors.  The reason for this myth is that although most major merchants offer business credit, most do not promote that they offer it.

There is no reason for a company to advertise they have credit where the applicant has no personal liability.  Home Depot offers a commercial credit account. But in almost all cases, the applicant is willing to provide their social security number when applying and is willing to take on the personal guaranty for the debt.

So it doesn’t make sense for Home Depot to then offer the applicant a card with no personal liability if the applicant is willing to sign and give their guaranty and accept the liability.

Still, Home Depot does offer business credit with no personal guaranty even though they don’t advertise it.

Many merchants are the same, they offer business credit but don’t promote that they offer it.  Business credit with no personal credit check or guaranty is available through Lowes, Home Depot, Office Max, Staples, BP, Shell, Wal-Mart, Sam’s Club, Costco, Radio Shack, and thousands of other major merchants.

Most merchants do offer business credit, even though the myth says they don’t.

Another myth about business credit is that credit limits are low and rates are very high.  This myth couldn’t be further from the truth.

Credit limits on business credit accounts are notably much higher than consumer cards.  A business owner can secure credit cards with $10,000 limits even after having a business credit score for only a few months. This is impossible to accomplish with personal credit.

And with 5-10 accounts reporting on the business credit report a business owner can qualify for multitudes of business credit cards with limits of $10,000 or higher.  A business owner can build massive amounts of business credit much, much faster than consumer credit.

And the interest rates and incentives are similar, if not better on corporate credit than consumer credit.

There has been much news recently about the record incentives that corporate credit cards are offering business owners currently.  These incentives are so good that corporate credit commonly has higher limits and better terms than most consumer credit accounts.

Another business credit myth is that if a company pays all its bills on time, its credit history is strong and in good standing. Unfortunately, while paying bills on time is important, your timely payments only help your credit rating when your business works with creditors who report the payments to business credit reporting agencies.

The secret to business credit is to locate and work with the vendors and merchants who work with the appropriate business credit reporting agencies.  Over 90% of trade-credit is not reported to the business reporting agencies. So even if you have many accounts setup with vendors, you still might not have a business credit score or profile established.

The bottom line with business credit is as a business owner you can review the credit standing of your own business and take steps to strengthen or build your corporate credit file and obtain credit with no personal guarantee or credit check.

Business credit is one of the best kept secrets in business, and can be one of your company’s most valuable assets.

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