Managing credit history for small businesses

/ business

Small business owners have a lot on their minds, especially when they are in the crucial first stages of establishment, and again when they start to think about expanding. The attraction of starting up or taking over a small business is the ability to bring a novel idea to the market and be responsible for the direction of your own career.

Anyone could potentially start up a small business - but not everyone who does will be a financial expert. Even if you're not in it to become a tycoon of the industry, knowing how to balance the books is a vital part of making sure the dream of a small business stays alive.

A small business nation

If you're one of Australia's enterprising small business owners, you're far from alone in your challenges. According to the Australian Bureau of Statistics (ABS), the number of small businesses has grown since 2013 - with the ABS defining a small business as one with 0-19 employees that are "actively remitting in respect of a GST role" and have an Australian Business Number (ABN)1.

The Australian Business Counts publication reporting that as of June 2014, there were just over 2.1 million businesses actively trading in Australia2.

"Overall we've seen an increase of 20,496 active businesses in Australia since June 2013." said David Skutenko from the ABS. "This was due to an increase in new business registrations, as well as a decline in the exit rate of businesses."2

Taking care of your credit file

Unlike bigger companies, a small business owner has two options when it comes to choosing how to operate - either as a sole trader/proprietor or a partner where the owner takes responsibility for the business's debt.

Sole proprietors will find that banks and other credit providers are unlikely to view your personal and business credit file as fully independent of each other. This is why it's important to be able to keep a close eye on your personal credit file as well, as credit providers could potentially reference both when making their decision, as well as other information against their lending criteria.

Alternatively, small businesses can set themselves up as a registered company, taking on all the responsibilities that come with this decision under the Corporations Act. Rather than the director, the company itself is associated with any debt.

Whichever route you've chosen, you can stay on top of your Equifax business credit report by signing up for a Business Credit Alert subscription where you'll get an email any time certain changes are made to your business credit file. If you want a copy of your personal Equifax credit report, you can get it for free here.

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.

1ABS, Counts of Australian Businesses, including Entries and Exits, Jun 2008 to Jun 2012. Accessed June 2015.

2ABS, Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014.Accessed June 2015.

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