Business Credit

Posted in Marketing and Strategy Terms, Total Reads: 637
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Definition: Business Credit

Business credit is very similar to personal credit. It represents the business’ ability and credibility to borrow funds from other business entities, lenders, banks and other non-banking financial institutions. The extent to which business credit can be entitled is basically decided by the past actions of the business.


When a business entity approaches the lender, supplier or partners for advancement of a loan, or for buying goods for credit, they lenders do not know whether the business entity is going to pay the loan amount back or not. Looking at the business credit of that business, the lenders can decide whether they can take a risk by allowing the business a credit. With strong business credit, one can borrow at lower costs and receive more favourable terms from suppliers. They may also be able to get loans without any personal guarantee.


The steps to establish a good credit is similar to that of establishing a personal credit. The business entity should not default on the payments. They should repay the money responsibly within due date and the repayments of debts should be reported to the business credit reporting companies to improve the business credit report of the business.

 

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