Tips for Building Business Credit
Establishing business credit is an integral part of expanding your company, particularly if you intend on applying for loans or other forms of funding.
Establishing accounts that report payments directly to major business credit bureaus is the cornerstone of building business credit. Here are a few steps that can help your company do just that: 1. Open a Bank Account
1. Open a Business Bank Account
Establishing a business bank account is an essential first step to building strong business credit, setting the stage for future interactions with financial institutions and making you more appealing to loan officers should your operations or services require additional financing.
An LLC helps protect both your personal and business finances so that, should the business go belly-up, it won’t wreak havoc with either one – for instance if the latter should fail it won’t affect either one negatively. Some banks even provide cashback rewards or extended grace periods on monthly bill payments and “floats” specifically designed to support small business accounts.
Search for banks offering business credit cards as these can help your organization establish and build strong credit. Being paid on time helps establish and build strong business credit ratings.
2. Open a Business Credit Card
Business credit is key in helping your company access loans and credit cards, build relationships with vendors, and secure contracts. It illustrates your reliability as a borrower and could make or break its financial future.
Establishing business credit is best accomplished through opening and using a business credit card responsibly, paying it off on time, and selecting vendors who report payment histories directly to major business credit bureaus.
Building business credit from scratch may take two years, but you can expedite this process by asking lenders listed on your business credit reports to raise your credit limit as soon as they see that your record with them has improved.
3. Pay Your Bills on Time
Paying bills on time may seem obvious, but it is an integral component of building business credit. Delinquent payments can negatively affect your profile and make qualifying for loans or financing difficult.
Establish recurring payment reminders through your bank account in order to avoid missing due dates, as well as reviewing your monthly statement in advance to ensure its accuracy and identify any possible fee increases.
Companies with excellent business credit often can access business loans more quickly when applying for them, as lenders consider both cash flow and past credit history when deciding whether or not to lend them money – this helps lenders make responsible lending decisions more efficiently.
4. Establish Trade Lines
Small businesses must build up their credit profile and report in order to succeed, with positive trade lines on your report being of equal importance.
Creditors and capital lenders use information contained on a business credit report to gauge its trustworthiness and ability to pay its bills on time. Achieving several favorable trade lines on one’s report gives credibility with creditors, increasing chances of qualifying for financing or favorable terms from suppliers.
Establishing tradelines takes time and requires thorough research. It’s essential to select vendors who report to business credit bureaus, while avoiding illegal methods of increasing your score such as buying authorized user spots on existing tradelines.
5. Monitor Your Credit
Checking business credit reports and scores regularly from major bureaus is essential for keeping tabs on progress and ensuring there are no errors that could have an adverse impact on your company. Credit bureaus typically welcome the opportunity to correct any verifiable errors found within a report, should there be any.
Excellent business credit can be essential in many ways, from making financing easier or cheaper, to improving terms with suppliers and creditors. By following the tips listed here you can develop and build strong credit for your business and reap its benefits.
Are You Struggling with Where to Begin Your Business Credit Building Journey? Consider opening a Credit Strong Business credit-builder account. Our loan payments will be reported directly to Equifax and PayNet Business credit bureaus so you can begin building business credit immediately!