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One of the best tools that you can use to help yourself build some solid business credit is a good credit card for business. Business credit cards are astonishingly helpful for a number of reasons, but to understand them, you must first understand how the business credit system works.
Business credit is not based on an individual human being, but rather on a fictitious legal entity that is separate from its members. Setting this system up can be a pain, as it requires a few trips to the lawyer’s office, a number of times that you will have to file with the IRS and the credit reporting bureaus, and the formation of some merchant trade lines, bank accounts and telephone numbers. However, all of this is important to protect your personal assets; having a credit card for business means that it and other forms of credit are responsible to the business; not to you.
Business credit is a system that calculates the reliability of a business based on its assets, reliability and profitability. It needs to see, among other things, a steady stream of numbers in the black, as well as a strong opportunity for growth. While simply having a credit card for business is not going to run your business into the black, it can at least help your lenders see that you are able to make repayments on your loans so that you will qualify for certain loans. This is an important asset early on in the development of your business; with a good method for early credit generation, you can quickly work yourself up to qualification of loans that will be much more helpful to your long-term strategy.
