9 Tips To Build Business Credit
Nov 23, 2022
Women who are new to a business or have an already existing one all aim for something more robust, and that is building a good business credit score. They search for ways to obtain this credit, either to cover the startup's costs or grow their company.
As a business owner, it is imperative to understand the connection between the two. This is because your business' credit score directly depends on how well you manage the credit you receive and tells lenders how you will handle paying back loans. A great business credit history could make receiving access to capital in the future easier and more affordable.
Dun & Bradstreet, Experian, and Equifax are the top three business credit reporting agencies in the United States. In order to get access to your company credit report from all three reporting entities, you will have to pay a charge.
Why is business credit imperative and does it work?
Similar principles apply to both personal and business credit. For instance, as a business owner, how you manage your business credit can affect its credit ratings. Similar to personal credit, the credit ratings of your business can affect your capacity to apply for additional business capital, such as business loans or lines of credit.
A good business credit score of 80+ is a great indicator for lenders and can result in lower interest rates. Having strong business credit also gives you access to numerous funding options with lenders.Even if you don't need access to additional funds right now, it is crucial that you start building business credit as a new or established business owner. It takes approximately 2 years to build solid business credit.
What is a Business Credit Score?
A business's credit score tells lenders how creditworthy it is and how likely it is that it will pay back its debts on time. A business credit score is typically between 0 and 100, as opposed to a personal Fair Isaac Corporation (FICO) score, which can range from 300 to 850. Several factors impact your business credit score:
● The oldest financial account's age
● Current liens
● Financial history
● Negative judicial rulings
● Utilization of credit
● Bankruptcy decisions
The utilization of credit refers to the proportion of credit you are using compared to the total credit available to you. As a business owner, you should keep your credit utilization ratio under 30 percent. While business credit card issuers frequently consider your credit scores when reviewing your application, your business credit score reflects all of your business accounts.
How to Acquire Credit for Your Business?
There is no denying the significance of having a solid business credit rating, but how can you start from scratch as a business owner? It is not easy balancing life as a wife for me, mom, and running a business altogether. But if you know what to do, then acquiring business credit can be very simple.
Establishing your company lawfully and registering with different business credit reporting bureaus are the first steps. The next stage in maintaining your credit score is to create sound financial practices. Finally, it would be best to keep an eye on your score throughout the year to ensure it reflects the wise financial practices you're forming.
Here is a step-by-step guide on how to acquire credit for your business:
#1. Create your Company.
Create your company and establish a business phone number. This is a requirement for building business credit.
#2. Register your Company
You have the option of registering your company officially as a single proprietorship, corporation, partnership, or limited liability company. Establishing credit for your company and obtaining your employer identification number (EIN) is often easier if you register your firm as a corporation or an LLC. This is due to the possibility of mixing your personal and commercial credit histories when operating as a sole proprietorship.
#3. Obtain an EIN
Use your EIN to apply for business credit as soon as you have it. This helps build an EIN-specific credit history that could be useful in the future.
#4. Get in Contact with the Bureau
Establish your company's credit file with the U.S's top three main credit reporting agencies (Dun & Bradstreet, Experian, Equifax) and the Small Business Financial Exchange.
#5. Choose Appropriate Vendors
Choose vendors who offer the 30 and 60 days time frame credit terms, and notify business credit reporting agencies of your payments. Try to persuade current merchants that don't disclose your payments to credit reporting agencies to start doing so.
#6. Request a Line of Credit for your Company or a Credit Card
Request for a line of credit or company credit card. If your company is new, you might need to contact regional banks or local credit unions. As an alternative, you can think about requesting a secured credit card.
#7. Make Payments Often and on Time
Make sure you make all your payments on time once your credit files are established because late payments will lower your business credit score.
#8. Obtain a Business Loan
Seek a small business loan once your company has a year of credit reporting under its belt and make on-time payments on all of them.
#9. Pay Attention to Your Credit
Your business credit reports may contain inaccuracies, just like personal credit reports. You can identify potential issues and repair them by periodically monitoring them.
Conclusion
As a business owner, it’s essential for you to get the kind of business credit that you believe will work best for you now and in the future. Take the time to thoroughly research your options before selecting a company credit card or a business line of credit.
If you like this information, make sure you like, share and SUBSCRIBE to TCM (The Career Mompreneur) Financial Planning & Coaching Business. Also, we go over all the components of business credit in our Platinum Membership, so make sure you hit the SUBSCRIBE button. If you have any additional questions, you can reach out to us at: [email protected].
Stay connected with news and updates!
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
We hate SPAM. We will never sell your information, for any reason.
