A question many new business owners as is how many business credit cards, vendor accounts and other forms of credit should my business have. The answer depends a lot on the needs of the business, but from the standpoint of good business fundability there is a definitive answer. Banks have a minimum that they look for when considering any business for a traditional loan. They want to see at least 3 vendor accounts and 4 to 5 credit card accounts in the business' name.
What's in a Name on a Credit Card?
A bank may use your personal credit to provide backing for a business loan if you chose to go that route. It is not advisable to use your personal credit, however, even if it is in good shape. There's too much at risk. Even if your business continues to do well and you can make all the loan payments on time you still lower your own personal available credit. If you need something important for yourself or your family you may not be able to get a loan because you have too much personal debt from a business loan.
In order to establish business fundability you need to have credit accounts in the name of your business, not your own name.
The Difference Between Vendor Accounts and Credit Cards
There may not seem to be much difference on the surface. Both vendor accounts and credit card accounts give you a stipulated amount of credit to spend. You can use them to get supplies for your business, and also build your company's credit score. Both report to the various business credit reporting agencies. Vendor accounts are different from credit cards, because they can only be used at the particular store/company. A credit card can be used at any location that accepts that form of credit.
Credit cards are more powerful in general, and often offer perks on top of the ability to buy items or services. They are also more difficult to obtain, though, and like a bank loan will usually require the business to already have a decent credit score. That's one reason vendor accounts are so helpful in building corporate credit and improving business fundability.
