Building Corporate Credit Vs Building Business Credit
In the world of small business financing there are two terms that often describe the same method of finance, but they are also often confused. A small business owner in search of financing without using a personal guarantee starts the process of developing a credit profile that is based solely on the business. Understanding the difference between building business credit and building corporate credit can make all the difference when the small business owner is attempting to obtain small business financing.
It can be argued that the terms business credit and corporate credit are exactly the same, and they are in many ways. It is where they differ that is important to understand so you best protect yourself and your assets. They both imply the financing sources available to businesses but the difference comes with the structure of the business.
There are some companies that will tell you the only thing you need to start is an EIN and a DBA for your sole proprietorship. The other companies promote corporate credit which involves setting up a corporation or LLC and using its EIN for to build corporate credit. Although this is a technicality it is important to understand the consequences of building corporate credit without setting up a corporation or LLC.
Building business credit without a corporation or LLC might not affect your financing options in the short-term but it will often lead to problems down the road. First is without a proper entity (corporation or LLC) you are instantly liable for any debt created by the business. Second is many lenders will not lend to a business that is not a corporation or LLC.
That being said, the two terms are synonymous and you will often see them interchanged but the only important thing to keep in mind whichever term you wish you use is to have a properly structured corporation or LLC to begin building from.
For more details you can consult with the experts at CL King and Associates.
CL King provides investment banking, equity research, sales and trading, and investor services to corporations and institutions. The firm also co-manages bond offerings, IPOs, follow-ons, secondaries, convertibles, and preferred.
If you want to learn more, please visit here: http://www.clking.com/