Running a business is no small feat: it requires passion and perseverance, as well as a good head for the market. As an owner or manager, you'll be juggling responsibilities for the business's daily operations, as well as planning for the future.
Part of expanding often involves laying down capital to invest in the growth of the business. However, in order to take the next step, many businesses will rely on credit to keep things afloat.
If you've been thinking about taking out a line of credit for your business, there's a lot you need to consider, especially if you are a sole proprietor or small business owner - as credit decisions you make can be reflected in your personal Equifax credit report.
Using credit to your advantage
This is not necessarily a bad thing in itself - credit can be a useful tool in handling expenses and supporting cash flow, but it is important that businesses exercise caution to properly manage their credit.
According to Inc. Magazine, it's important to put effort into building credit with your vendors and suppliers to support business healthy credit.
"First, make sure that you understand your financials and that they align your records with federal account history and balances," advises Inc. "Secondly, define how much credit you actually need by analysing your business plan and projecting your monthly cash flow."
"This should determine how much credit you'll need to apply for, as applying for too much can actually affect you negatively."1
Keeping track of businesses credit
One way you can track your business credit history is by requesting a copy of your Equifax business credit file. In it, you can see events which are visible to credit providers, which can be used in deciding the success of any future credit applications.
Entrepreneur contributor and CEO, Michael Stanfield recommends vigilance when it comes to keeping on top of credit.
"Use a credit-monitoring service to monitor your credit, or regularly monitor your credit yourself, to ensure that no ones using your credit fraudulently. Open your credit statements as soon as they arrive in the mail and review them, or monitor your accounts online."2
You can keep track of any changes made to your Equifax business credit report with Business Credit Alerts, which will notify you by email when certain amendments are made.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
1Inc. Magazine, How to Responsibly Use Credit Cards for Your Business. Accessed June 2015.
2Entrepreneur, Managing Your Personal and Business Credit. Accessed June 2015.