Small business owners are often preoccupied with developing new products or services, but they can neglect something that may increase their odds of financial survival-establishing business credit. Small business owners should take steps to establish credit in the name of their business as a way to preserve cash flow for necessary business operations, purchases and rental payments.

In order to establish business credit, in many cases small business owners must initially be willing to personally guarantee their business's credit until credit is established in the name of the business. Of course, in order to extend personal credit to one's business, the business owner or owners need strong personal credit.

Therefore, getting one's personal credit in good shape is important before establishing a business. Business owners can check their own credit file to ensure that they have the best possible rating to ensure that another business would regard them as a minimal risk of defaulting payments.

A personal guarantee may also persuade a vendor to extend credit to a new business that it would otherwise decline.  This can help provide a further level of comfort for vendors when working with newly established businesses.
Small businesses should also produce a sound business plan and financial statements. This is important because vendors will often look to these when making a decision to extend credit to businesses for the purchase of goods and services. A good business plan and financial reports will help assure vendors that the small business they are selling to on credit is sound, and represents an acceptable credit risk.

Business credit is also a two-way street. The same care and level of scrutiny suppliers give your small business should be your guidelines when selling to your customers. Selling goods and services can only help a business's cash flow if customers make timely payments for them. In order to make good credit decisions when selling to potential customers, small business owners need to set up credit applications, policies and procedures. Perhaps even more importantly you should take the time to know your customers credit history to ensure that they will pay your bills on time.