You might not know it, but business credit isn’t just for small business owners and those who work for large corporations. In fact, if you are self-employed or running a side business that earns you extra income, business credit can be a good option for you.
There are several reasons why business credit is important. To begin with, it’s a great way to keep your personal and business finances separate. Separating your personal finances from your business simplifies accounting, borrowing, and tax matters.
However, business credit is just as vulnerable to cyberattacks as personal credit. For your business credit financing options, get a third-party credit monitoring service.
THE ROLE OF BUSINESS CREDIT CARDS IN BUSINESS CREDIT
To establish your business credit, obtaining a business credit card is essential. Business credit cards should only be used for business-related expenses. However, keep in mind that each credit card company has a different threshold for what information it requires for a small business credit card.
The following are four reasons why you should consider adding a business credit card to your wallet:
- Business credit cards don’t appear on your personal credit report. The credit card issuer typically runs a hard inquiry on your personal credit report when you apply for a small-business credit card. Other than this initial credit inquiry, the business line of credit is separate from your personal credit line. Therefore, your utilization ratio and other factors shouldn’t affect your personal credit score. As long as you pay off your business card balances on time, it won’t negatively affect your personal credit score. Banks look at your business credit line when determining your interest rate when you apply for loans for purchases, real estate, or other large expenses. You are more likely to get better rates the more established your line of credit is.
- Good business credit can also result in lower insurance rates. Insuring your business is costly. Having a good credit score can lower your insurance costs.
- Business credit cards give you more spending power. Small-business credit cards often have greater spending power than personal credit cards. It’s partly because limits are based on both personal income and business revenue, as well as factors such as creditworthiness.
Monitoring your business credit is just as important as monitoring your personal credit when building credit. Monitoring your business credit report for changes can affect your ability to obtain credit when you need it most.
Is your personal information on the dark web? Make sure your identity isn’t at risk!