If you are a professional blogger you might not think having a business line of credit applies to you, but it does. Many bloggers already have set up their ‘business’ as a separate company for tax purposes. Yet many of the same bloggers haven’t taken the next step – setting up credit lines for their businesses. These can come in handy especially if they plan to scale beyond being a one-man (or woman) band. So, let’s look at what every blogger needs to know about business credit.
- Banks Will Check Your Business Credit Score
Business credit is a lot like personal credit, in that you need to use it wisely or lose it. While you probably know that banks will check your personal credit score, did you know they will also check your business credit score? This is especially true when you are applying for a Small Business Administration (SBA) or other loans for your business.
One of these checks includes pulling your business’ FICO score. This differs from your personal FICO score as it focuses on the credit risk profile of your business and not your personal credit. Given that businesses use credit more heavily than individuals, the algorithms tied to a business FICO score will take this into account.
Regardless, the key to business credit is using it responsibly and this means making sure that you manage your open balances and you make payments on time. If not, then you could run into trouble.
- Establishing Business Credit
Granted being a blogger is not a capital-intensive industry, but there are times when you might need to cover payment gaps or to ramp up a team to take care of a large assignment. Business credit can come in handy in those cases as it allows you some extra flexibility without leaning on your personal credit.
Besides FICO, another commonly used business credit score is Dun & Bradstreet’s PAYDEX. In this model, your business is rated on a scale of 1 to 100, with a business credit score of 80 or above considered excellent. Some of the easy ways to make sure your PAYDEX score is accurate is to establish store card accounts with your office and equipment suppliers, and then make sure you pay the accounts on time.
Now Dun & Bradstreet will not automatically assign a PAYDEX score for your business. First, you will need to make sure you to make sure you have opened a business credit file open. Then, you will need to have at least four different credit references, and that these credit references are reporting your details to Dun & Bradstreet. If not, then your business will fall through the cracks. So, think about opening accounts with your office supplier, your equipment supply, maybe a coffee or water delivery service, and a couple of gas stations. This will give you the foundation needed to establish business credit.
- How Business Credit Can Help You
Anyone can check a business’ credit score without their permission. This means that your suppliers, lenders, landlords don’t need to get your approval to check your business credit. However, this should not be something to fear. You want your business to have a good credit rating, this way you don’t need to lean on your personal finances to grow your business.
Imagine you need to outfit your office. Would you rather put the expense on your personal credit account or your business’ credit account? Or what about internet connections or rent? Again, it’s better to separate these expenses from your personal credit. But you need to have a solid business credit rating first.
While this is not complicated, you also need to know one common problem with business credit – companies with similar names often get confused. As such, you need to know the specifics of your business credit rating and make sure that any possible suppliers, lenders, or landlords have the right information always.
One last thing to know is that bank lenders and credit card companies often share information about delinquent business loans. However, most alternative lenders do not access this information. If you don’t have a delinquent loan, then you have nothing to worry about. However, if you had some financial problems in the past, then you will want to keep this in mind.
Building your business’ credit score is just part of building a strong business – even if you are a blogger. So, keep the fundamentals in mind and you will be able to access the additional cash you need to ensure your blogging business can thrive for years to come