Women have always had important roles to play in Filipino culture. For instance, within the household, mothers tend to make big decisions and hold the purse strings, which greatly impacts a Filipino family’s dynamic. In times of financial difficulty, women are not afraid to take charge and become breadwinners for their families.
Considering what today’s job market is like, it’s a particularly exciting time for a woman to step up. Moms are no longer limited to staying home, dividing their time between raising their kids and working in a physical office or going abroad just to provide for their families. Some of the rising stars in the world of entrepreneurship are moms who’ve struck the balance between their filial duties and their professional aspirations. And you may be well on your way to seeing that same success as a newly minted entrepreneur yourself.
To sustain your growth momentum, however, you’ll need to consider your financing options—including your business credit. If you head your own startup or small- or medium-sized enterprise (SME), business credit is essential for your business to flourish. But it may also reflect badly on your business and bring it down if you don’t make the right decisions. Ensure a strong start for the operations of your woman-owned business by avoiding these rookie mistakes with business credit:
1. Failing to Pay Debts on Time
Timely payments are a must if you want a credit history that can open doors of opportunity for your business. Missing payment deadlines can lead to a domino effect of negative consequences. For instance, not only will delayed payments harm your credit score; but they’ll also damage your relationships with creditors and suppliers.
One solution is to open a digital SME business banking account that allows you to do online business banking wherever and whenever you need to. In the Philippines, you can consider opening a Maya Business Deposit account instead of an account at your usual commercial bank. It offers several benefits for SMEs and startups run by women, such as a zero-maintaining balance and 2.5 percent interest per annum.
With your Maya Business Deposit account, you’ll be able to pay your partners and suppliers remotely via PesoNet and InstaPay at no extra charge. Even if you’re on vacation or taking a break from full-time business operations to take care of your family, you don’t have to worry about missing your payments and obligations.
2. Using a Personal Credit Card for Business Purchases
In the earliest stages of running your business, it may seem like the most convenient option to use your personal credit cards for business expenses. But mixing up your business and personal credit card expenses will lead to confusion and unnecessary accounting complications come tax season. You’ll also be at risk of hurting your personal credit score.
To build good business credit, make it a point to use separate credit cards for business transactions. Nowadays, it’s no longer as hard to find business credit card programs specifically designed to meet the needs of startups and SMEs. Use your business credit cards to maintain financial clarity over your business matters and to protect yourself from credit risk.
3. Mixing Personal and Business Deposits
As with credit cards, keep deposits to your personal savings account and your account separate. To maintain your business’s cash flow, open up a small business banking account such as a Maya Business Deposit account that you can easily check on with the Maya Business Manager dashboard.
Keeping your business deposits independent of any deposits made to your personal account will guarantee you a clearer and more updated view of your business’s financial standing and health. A platform like Maya Business Solutions will also allow you to disburse payments and track customer payments from a variety of payment channels.
Remember, mixing personal and business deposits can create financial chaos and lead to legal and tax complications. Be sure to keep your financial life organized by using dedicated business accounts and doing business banking online for all your official transactions.
4. Not Taking Advantage of Trade Credit
New women entrepreneurs may not be familiar with the term trade credit. But it’s one of the secrets to boosting your business without needing to raise additional capital.
In simple terms, trade credit is a form of credit extended by suppliers to their customers, allowing them to purchase goods or services on account and defer payment to a later date, often with agreed-upon terms such as net 30 or net 60 days. Trade credit serves as a vital component of many businesses' working capital management practices, and with it, you’ll be able to establish a positive credit history for your woman-owned business when your payments are made on time.
5. Structuring Your Business Incorrectly
Choosing the right business structure is not just a legal matter. It also significantly impacts your personal liability and credit. In the Philippines, you can opt for a sole proprietorship, partnership, corporation, or cooperative. Each structure has its advantages and disadvantages, so carefully consider which one aligns with your business goals and credit aspirations.
6. Not Checking on Your Credit Report
You may not know this from the get-go, but it’s possible to request a copy of your credit report from the Credit Information Corporation (CIC) and other credit bureaus in the country. The CIC, in particular, can put together a comprehensive list of all the loans and credit you’ve ever taken. Based on this data, the bureau will give you a final score that determines your creditworthiness.
Failing to monitor this report regularly can be a costly mistake on the part of a woman entrepreneur. Errors or inaccuracies on your credit report can negatively impact your credit score or your business’s credit score, potentially leading to unfavorable credit terms or even credit denial when you need credit the most. Be vigilant about your business credit reports, and consider requesting assessments from agencies like CIBI Information Inc. (formerly Credit Information Bureau, Inc.) and TansUnion as well as the CIC.
While every entrepreneur will make mistakes and learn from them, you’ll want to master concepts that pertain to your business credit as soon as possible. A little more knowledge will go a long way in nurturing your entrepreneurial dreams and making it easier to juggle your business and your family life.
As a new woman entrepreneur or mompreneur, you have lots of information available to you to make the right decisions for your company. Use this knowledge to grow your small business and become a true industry leader in your field.
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