Business credit fuels business growth.
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Most entrepreneurs are led astray by the incessant flow of wrong information about business credit. Because business credit can really help your business grow and allow you to take it to the next level, it is important that you know the facts, bust the myths and operate from a knowledge stand-point to avoid a financial burn out.
Here are 4 business credit myths that could literally bite you and bleed you to business closure:
Myth 1: I am too small and no one cares, do they?
The smaller you are, the more your business profile is monitored. Because you are small, every step you take with your creditors, supplies and vendors, insurance companies and anyone else you deal with everyday, first impressions matter a lot. You will be under constant observation as your registration details, name of your business, details of loans you took, bills you paid, other registrations you made, etc., is made available to those concerned.
Myth 2: My business credit profile doesn't need to be monitored much. What can possibly happen?
Every step you take while running your business operations, including those transactions you undertake with your stakeholders like suppliers, creditors, customers, licensing authorities affects your business credit profile. Truly, what you give reflects who you are in business. As long as these transactions are positive, business credit is made available to you readily. Positive transactions and relationships with stakeholders in your business establish trust – which is the key to business success; especially if it is about borrowing money.
Myth 3: I am small and hence I deal with small creditors and lenders. Big banks won't know, will they?
Big creditors and banks certainly will know. Small creditors might extend a loan purchased from a big lender and these creditors have great interest in knowing where exactly their money goes. Actually, your credit manager or the small lender might not even involve in the process that grants loans to you. Mostly, it's an automated process with cut-off scores to screen applicants. For all you know, your friendly local credit manager might just be facilitating the loan disbursement from a larger bank – the ones you should deal carefully with.
Myth 4: Well, loans are loans. My business as such still remains unaffected on the whole.
No. Your business can be more than just affected; it is judged on the basis of your business credit profile. If you keep your business credit profile healthy, you will receive more business credit as a result of that at better interest rates than prevailing. This is visible and is noticed by your customers, suppliers, vendors and other creditors too. Since you get favourable interest rates and more lenient payment schedules, your business enjoys a positive cash flow, favourable business growth and increased line of credit.