Corporate Credit - When Is It Important To Access?
Your business will need to access corporate credit at different points in the development of it. This is something just about every type of business is in need of so do your homework early. Even if you don't need to access corporate credit right now, you want to have something readily accessible. You may have to apply with several different lenders before you are successful in getting a corporate credit card and a corporate line of credit. This is because new businesses are deemed to be very high risk for lenders.
Too many new business owners don't handle the corporate credit that has been offered to them effectively. As a result, they end up having to pay a large portion of their profits towards that debt every month. They also don't have the corporate credit readily accessible when they do need it later on. This can prevent them from being able to have the money to repair equipment or to pay for something that the business really needs.
You should view that corporate credit that you have established as a safety net. Most of the time you aren't going to want to access it, but it is very nice to have it in place. The fact that you aren't relying on that corporate credit that has been extended to you means a lot in the eyes of the lender. It tells them that your business is doing well enough that you don't have to use it.
Don't let that statement scare you into not using the corporate credit you have access to though when you really need it. Sometimes you will need to use it in order to take care of something for your business. If your production has slowed down or quality is suffering due to an equipment problem, you definitely need to invest in getting it repaired. Otherwise you are going to end up with other problems that are going to cost your business money in the long run.
Sometimes you will come across a terrific business deal that is going to require expanding your current operation. If you have crunched the numbers and it is definitely going to be profitable, then you may want to access the corporate credit to fund that expansion. Make sure the long term benefits of this process are going to be there though or it may be a frivolous use of the corporate credit you have.
The biggest problem though is using corporate credit when you don't need to. Those little purchases quickly add up and then you are stuck with a bill to pay for them. The amount of interest you end up paying makes these small purchases more expensive. Make sure you recognize what the real cost is when you use corporate credit for any type of expense. You don't want to use up the corporate credit though and then not have any left when you desperately need it.
Use corporate credit when you have to, but for other purchases you need to have the discipline to hold off on them until you have the money on hand to pay for them. A new office, new carpet, and new computers may be something you want but they aren't going to improve the profitability of your business. Therefore they aren't necessities and you should avoid using corporate credit for them.
Never lose sight of the corporate credit you have access to. Keep it as a way to get your business through so hard times that may lie ahead for you. Don't rush to use it at every turn or you are going to end up owing more money that your business should. This will be a dark cloud hanging over you as you struggle to repay the funds including interest. You need to be very smart to when it comes to using corporate credit so that you are always able to rely on it when you need to.
To learn more, consult with the experts at CL King and Associates.
CL King’s Corporate Services unit offers specialized services and objective advice to help corporate clients achieve flawless execution directly in the capital markets. You can call at 518.447.8050
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