Business credit is a form of credit or loan, which is offered to various types of businesses and commercial enterprises. The principal use of business credit is for forming an adequate capital base of a commercial enterprise. However, business credit is implemented for a number of other purposes also.
Concept and Benefits of Business Credit
- Business credit is simply a type of commercial loan that is provided by a number of financial services providers.
- Business credit is a useful tool for corporate sector entities.
Following are the benefits of business credit:
- With the help of a business credit, a new entity can be formed instead of a new identity.
- A business credit is not regarded as anybody’s personal credit or personal debt.
- A business credit can be received irrespective of anybody’s credit scores.
- A business credit can enhance the image of a business in an impressive manner.
Utilization of Business Credit
- A business credit can be utilized for purchasing computers, office equipments, and office provisions.
- A business credit can satisfy any sensible office requirement or commercial function.
- A business credit can be utilized for getting leases, truck loans, or new automobile loans.
Forms of Business Credit
Following are the various forms of business credit:
Commercial Finance: Account receivable factoring, asset lending, inventory loans, and purchase order financing.
Working capital finance: Equity loans, micro loans, credit score loans, business credit cards, merchant advances.
Small Business Loans: Economic development loans, SBA (Small Business Administration) small business loans, lines of credit and start-up loans.
Equipment Finance: Software financing, equipment leasing, medical leasing, cash-out selling leasebacks.
Commercial mortgages: Mortgage banking, commercial real estate loans, hard money loans, construction loans
Equity Investments: SBIC (Small Business Investment Company) government investments, investment banking, venture capital, mezzanine financing.
In conclusion, it can be said that the necessity of business credit among business enterprises is increasing day by day.