FIN367 : Business Credit Essentials (CHAPTER 2)

What is the importance of credit score in business credit?

• It has no impact on business credit

• It only affects personal credit, not business credit

• It is only important for small businesses, not large corporations

• It helps in obtaining favorable terms and rates for business loans and lines of credit.

What are the different types of business credit?

• Trade credit, revolving credit, and installment credit

• Personal credit, corporate credit, and government credit

• Short-term credit, medium-term credit, and long-term credit

• Cash credit, check credit, and debit credit

How can a business build its credit?

• By ignoring credit history and only focusing on cash transactions

• By establishing a positive payment history, keeping credit utilization low, and diversifying credit types.

• By maxing out credit cards and applying for multiple loans at once

• By consistently missing payments and accumulating debt

Name one credit reporting agency that deals with business credit.

• Experian

• Dun & Bradstreet

• TransUnion

• Equifax

What are some strategies for managing business credit risk?

• Having a vague credit policy

• Implementing credit checks, setting credit limits, monitoring customer payment behavior, and having a clear credit policy.

• Ignoring customer payment behavior

• Not setting credit limits

Why is it important for a business to have a good credit score?

• To access financing at lower interest rates and better terms.

• To improve product quality

• To increase customer satisfaction

• To have more employees

What are the potential risks of not managing business credit effectively?

• Increased customer satisfaction and loyalty

• Enhanced business growth and expansion

• Potential risks include financial losses, damage to business reputation, and limited access to future credit.

• Improved cash flow and financial stability

How does business credit differ from personal credit?

• Business credit is not important for a business.

• Business credit is based on the creditworthiness of the business owner.

• Business credit is based on the creditworthiness of the business entity.

• Business credit is the same as personal credit.

What are the steps involved in establishing business credit?

• Selling personal assets to fund the business

• Applying for a personal credit card

• Opening a business bank account, obtaining a federal tax ID number (EIN), establishing a business address and phone number, and applying for a business credit card or line of credit.

• Hiring a business consultant

What are the consequences of defaulting on business credit payments?

• Damage to credit score, legal action, difficulty obtaining future credit

• Higher credit score, positive legal action, better access to future credit

• No impact on credit score, no legal action, no effect on future credit

• Improved credit score, no legal consequences, easy access to future credit