Startups are an incredibly important part of our nation’s economy. In fact, 21% of all small businesses in the US are startups. They drive economic growth, foster ingenuity, and provide jobs. Even though startups make up such a vital aspect of our economy, they often have a difficult time getting the financing they need.
This is what makes business credit so important for startups. Building strong business credit is the best way for businesses to ensure they get the cash and credit they need to maintain inventory, manage cash flow, get new equipment, and take advantage of growth opportunities.
Financing Challenges Facing Startups
Startups face a unique set of challenges, especially financial ones. According to the NYFED, the top two financial challenges facing startups are:
- Managing Cash Flow
- Business Costs
In order to meet these obligations, most startups turn to banks and lenders. Unfortunately, most are denied the financing they need to operate their business.
Lack of Credit Leads to Denial
Insufficient credit history is the number one reason startups are denied financing. That’s why it’s so important to understand what business credit can do for your business.
Robust business credit is one of the most valuable assets available to startups. Yet, very few business owners are aware they have a separate business credit score. 45% of all small business owners weren’t aware their business had its own credit score. What’s more is that nearly 75% don’t know where to find info on their business credit score.According to NFIB, business owners who understand their business credit score are 41% more likely to get approved for financing. Understanding your business credit file is so much more than just knowing a number.You need to understand the data and what it means. You need to understand how vendors and lenders report your payment information. You also need to ensure that all business data is accurate. Many businesses have an error or flaw on their report that is holding them back from the financing they deserve.Understanding your credit report helps you better understand how to strengthen your score and put it to work for you.