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Building Business Credit for New Entrepreneurs


Here’s our take on ways to leverage your business’s credit rating into success.

Although having a great concept and a viable business plan are important for creating a successful business, they are not the only qualities you need to create positive cash flow and – in the long term – a solid business. For many people, figuring out how to get their idea from concept to finished product is the difficult part of business, especially since fledgling entrepreneurs treat business credit like personal credit and believe each step must be paid for before it is taken.

By building a strong business credit rating from the ground up, you can get terms that will allow you to buy raw material over time, giving your business the opportunity to create the finished product before the raw material must be paid for.

SME financing concepts and benefits

SME (small and medium-sized enterprise) financing is an umbrella term that covers a range of different funding and credit options. Everything from small business loans to net 30 accounts fall under the heading of SME financing.

By building your company, from the ground up, to take advantage of SME financing options, you can create a viable cash flow situation before making your first product. Once your products have reached the market place, the income can be used to pay off your loans or pay up your net 30 accounts and the profits can be invested back into the business to expand or create new products.

For example, if your new business is making building better mousetraps, you can get a SME loan from your bank or financial institution – using your personal credit rating – while negotiating net 30 terms with your primary vendors. The loan will give you cash on hand while you have 30 days to manufacture your products before they must be paid for. By keeping your credit in good standing, you will create a 30-day grace period between the receipt of your material and when it must be paid for. As your credit rating improves, you can expand production or develop new products without having to pay for them up front.

Startup cash

The majority of new business owners don’t have the luxury of having spare cash lying around. To create a new business, borrowing money from banks or other lending institutions is an uncomplicated way to raise capital. If you have collateral to secure your loan, most financial organizations are willing to lend you money. The risk is minimized for them and you are incentivized to repay the loan.

With the global reach of most banks, your location is no longer the limiting factor. A business in Brooklyn can borrow money from a bank in Singapore, London or wherever offers the best terms.

Even without collateral, there are options to raise startup money. If your personal credit rating is good, unsecured loans can give you the starting cash you need. Venture capitalists are always on the lookout for the next “big thing” in business or products and are a viable source for startup money.

Taking advantage of net 30 terms

Borrowing money, however, is a short-term answer for generating cash flow. Net 30 terms allow you to delay paying for raw material until you are selling your products. Of course, net 30 terms won’t help you if you do not have a market for your idea or product. Some things can’t be bought over time and promising ideas are one of those things.

By combining the advantages of SME loans in Singapore, the United States or wherever you are located and net 30 terms you can create a business from thin air and have it generating income prior to the first bills ever coming due. For small businesses, your personal credit rating is very important until your company has established its own payment habits and credit rating.

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