If you’ve started a business but haven’t paid much attention to establishing business credit or fixing bad credit, it’s a good idea to start prioritizing your credit report. For example, if you can’t get a credit bureau to remove outdated information from your report, hire an attorney to speed up the process.

Having strong business credit will give you access to the capital you need to build and grow your business at decent interest rates.

Here’s why that matters!

1. New businesses have startup expenses

The first reason to prioritize your business credit is to give yourself access to the capital you need to launch and grow your business.

Although it would be nice if they were always minimal, startup expenses can add up fast. For example, even if you’re just launching a simple online business with no inventory to hold, you’ll probably have the following expenses:

• The cost of starting an LLC or corporation, which includes filings and opening bank accounts.
• Buying a domain name and building a website.
• Buying software subscriptions for digital marketing accounts, like email marketing, split testing, and e-commerce.
• Paid advertising expenses, like PPC ads on Facebook, Instagram, or other platforms.
• Attorney fees to ensure you do everything right and draw up contracts.

These are just a small number of startup costs you may incur for your business. Your true costs will likely include at least twice as many expenses at varying amounts, and you will probably need a few thousand dollars minimum to get started. You’ll need much more to grow.

2. Hiring staff gets expensive

Once you reach the point of needing to hire additional people to work for your business, your expenses will increase exponentially. However, you probably won’t see an equal increase in revenue – at least not at first. Hiring people requires you to have enough capital to pay employees and contractors while your business grows.

If you’re going to hire employees, you can expect to pay far more than if you hire contractors. You’ll have to pay them an hourly rate or salary, plus half of their payroll taxes, and cover a handful of other expenses, including insurance.

It is cheaper to hire contractors, but this requires care. In many states, even contractors must be paid as employees if they perform the same type of work that employees could perform. In these states, for someone to be considered a true contractor under the law, they are required to perform a specialty task that falls outside the realm of what employees can do for your company. Always consult an attorney before hiring anyone for your company.

3. Good credit makes you trustworthy

Having a good credit score shows that you pay your bills on time and don’t ignore your responsibilities. Although you’ll start small, the more credit you build, the easier it is to get additional lines of credit. When you can show lenders that you not only pay your bills, but they trust you enough to give you large credit limits, that’s even better.

4. You never know when you might need funds

There will be times when you’ll encounter unexpected expenses or situations where you’ll be presented with a good deal you can’t pass up. Having good business credit with access to capital will give you the chance to say “yes” to opportunities you would otherwise need to turn down. For instance, maybe you need a work vehicle and someone offers you a $3,000 discount if you pay for the car in cash.

5. You don’t want to use personal credit lines

When running a business, it’s crucial that you separate your business and personal funds. While credit bureaus will consider your personal credit history before issuing your new business a line of credit, the credit you get in your business’ name will be independent.

When you mix personal and business funds, it can eliminate your limited liability as an LLC or corporation. Unfortunately, according to the data, 46% of small businesses use personal credit to fund their companies. Don’t be one of those business owners. If you ever find yourself named in a lawsuit, having used personal funds can make you personally liable for damages. If that happens, you could lose your personal assets in the judgment. In turn, this will damage your personal credit.

Start strengthening your business credit for your future

Having strong business credit is the foundation you need to reliably build and grow your business. If you haven’t prioritized it yet, start now. Clean up any inaccuracies on your report and start building a solid credit history for your business.