Small Businesses Should Take Careful Steps to Establish Business Credit

Small business owners are often preoccupied with developing new products or services, sales activities, establishing a place of business and other endeavors but often they neglect something that may increase their odds of financial survival-establishing business credit. The National Association of Credit Management (NACM) recommends that smaLl business owners take steps to establish credit in the name of their business as a way to preserve cash flow for necessary business operations, purchases and rental payments.

In order to establish business credit, in many cases small business owners must initially be willing to personally guarantee their business's credit until credit becomes established in the name of the business. Of course, in order to extend personal credit to one's business, the business owner or owners should have good personal credit. Therefore, getting one's personal credit in good shape is a good idea before establishing a business.

"You will be asked many times to sign a personal guarantee," said Johnnie White, Credit Services Manager for Advertising with the Houston Chronicle. "Make sure you have good personal credit." White, who is a member of NACM South Texas, one of the nationwide network of NACM Affiliates, also recommends that when credit is extended, bills be paid on time. She pointed out that doing so not only helps solidify your relationship with that vendor, but it also may provide you with a good credit reference when trying to establish credit with other suppliers. "If you pay us on time and we can reference for you, we will," White said.