Business credit is an important aspect of creating and establishing a successful business. A good business credit score will give you the opportunity to borrow funds to grow your company and take it to the next level. Read on to learn how a virtual office can help you build your business credit!

Business v. Personal credit. Do you know the difference?  

Your personal credit is a score based on your personal credit history. When determining your credit score, credit bureaus look at the number of accounts you have open, your overall debt, and your repayment history. This is weighed against your income to debt ratio, and they come up with a score. Most lenders use your personal credit score to evaluate the risk or probability of loan repayment in a timely manner. Business credit is an entirely different animal and serves a unique purpose. Your business score is a totality of your business finances leveraged against the life span of your business. It is tracked by your company’s EIN.

Although they are two different metrics, the lines often get blurred, especially if you are a sole proprietor and use your personal credit instead of business credit to make purchases. It’s important to understand that each has an impact on the other.  

What is personal credit? 

Most people start to build their personal credit when they get their first credit card or take out a loan for college. Personal credit is linked to your social security number and follows you for the duration of your life. Three main credit bureaus keep track of your history, collect information from creditors, and issue reports. They look at a multitude of factors to come up with your score, such as how many lines of credit are opened, the timeliness of repayment, and your overall income to debt ratio.

Personal credit scores range from 350/poor to 850/excellent. Your credit score determines loan eligibility for mortgages, car loans, and more. It also sets the interest rates that you may qualify for. The higher your score, the more options you have.

What is business credit? 

Business credit is a financial tool for your business. It’s used to qualify for loans and financing and establish healthy relationships with vendors and B2B companies. If your company has low credit, this can affect your company’s ability to secure that much-needed loan for growth. A high business credit score can often be used as leverage during negotiations, giving your company an edge over the competition when dealing with vendors or suppliers.  

Business credit is linked to an Employee Identification Number (EIN). An EIN is an IRS tracking number for your business (think of it like a social security number for your company). To obtain an EIN, you must send an application to the IRS independent of your corporate filing with your state of incorporation. Once you have an EIN, you can open business bank accounts and credit cards.

The goal of every business is to establish good credit. As important as it is to do that, you wouldn’t be fully informed if you didn’t understand the nuances of bad or negative credit and how that can impact your business. First, let’s define financing and how it helps to grow your business. By definition, business financing refers to the corpus of funds and credit utilized in every business. Most businesses rely on financing to purchase assets, goods and services, raw materials, and more. Without financing, you severely limit the growth of your company. You won’t qualify for credit cards, business loans, or financing without good credit. This can be catastrophic for new businesses in the initial growth phase.

As important as good business credit is, a recent study done by NAV Small Business American Dream Gap Report shows that of the 250 small businesses surveyed, 45% didn’t know they have a business credit score, 72% didn’t know where to find the information and 82% didn’t know how to read the report. By not being financially savvy, many entrepreneurs leave money on the table and hinder their growth opportunities.  

How Opus Virtual Offices can help

As an Opus Virtual Office client, we can help you establish positive business credit. Once you register for a mailing address with Opus VO, after your first 30 days as our customer, you can request that we report directly to credit bureaus every quarter. This will establish positive business credit and give you growth opportunities. As an Opus VO client in any of our 650 locations nationwide, we can help you build your business credit. Call and inquire today!