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Corporate Credit Building Programs 101

When you start a company, you will have to orient yourself as well as your partners about the various corporate credit building programs on the market. These programs are life-savers, but you need to know about them before you can expect to make the most out of what they offer your fledgling company.

What is a Business Credit?

Business credit is nearly similar to personal credit. Business credit standing is a means for a company to apply for a credit line. Potential creditors will be looking at a business’ credit score to determine its eligibility to be awarded business credit.

Business credit was established as a means to protect entrepreneurs from the backlash of a negative credit action, like defaulting on a loan agreement. In this case, only the business’ credit score will be affected while the personal credit record of the entrepreneur is not. That way, you can still apply for personal financing instrument even if your business is having problems.

However, it is still not a good idea to use your personal credit to secure a loan for an ailing business because you will be exposing yourself to significant risk. Some businessmen are tempted to go through this route especially at the start of their enterprise. That, however, should not be the case if the entrepreneurs were aware of corporate credit building programs.

What Do These Programs Do?

As their name suggests, business credit programs are designed to help a startup company build a minimum credible credit score so that it can have better chances of being approved for a loan in the future.

Given the fact that a startup company has to engage in a financial instrument and comply with its terms in order to gain good credit standing, these corporate credit building programs offer specialized services that satisfy these terms without making it too hard for the startup enterprise.

One example of a credit building program is the company tradeline service. The name comes from the financial term “tradeline,” which is basically just an entry into a specific corporate entity’s credit record. When a payment is made, a tradeline is recorded. When a term is missed, it will also be recorded as a tradeline.

In order for a company to get tradelines, these programs offer loans with interest rates that has to be paid off in regular intervals. This is almost similar to a normal loan, because the tradeline loan is not meant to be settled. Instead, a company is expected to make the payments on the interest rate regularly.

The logic remains the same – with each payment, the company’s credit score is updated. With each timely payment, the company gets to have a sweet, positive credit annotation in its record. When the payments cease, the company has enough credit standing to make it eligible to get a real business loan. That is because the tradeline service has helped it demonstrate its capability to make regular payments on any business loan.

These corporate credit building programs represent a crucial lifeline that every startup company should be looking into.