5 Things You Can Do To Build Your Business Credit Today
Good credit history is way more important than many people think.
It provides essential support that every single business needs. Having a strong business credit translates to easy and fast access to finances for your small business.
However, business credit history takes a long time to establish and build. Therefore, if you’re in urgent need of funds, it might be difficult for any credit organization to approve a loan.
That’s why getting to know how to build business credit and starting growing it today will help whenever you want to access capital to invest in your small business in the future.
Here is how you can achieve great business credit and receive the benefits associated.
5 ways to build your business credit
1. Create an accurate business profile
Banks and lenders do not offer business loans to businesses that are don’t have an actual business structure, so try to incorporate it as an LLC (Limited Liability Company). You can also research the differences between LLC vs S-Corp that will help you make a better decision. What this will do is separate your business from yourself: 2 very different entities.
Besides, in case of a dispute with wrong credentials on your profile might result in legal actions against you (and not your business, which will only mean trouble).
2. Create strong relationships with your suppliers
Suppliers are often willing to sell goods on trade credit. This means that if you have a good relationship with them, they might give you some leeway and let you pay some days or weeks after you received the product they sell. With on-time payments to your suppliers, you can start building your credit history. This not only builds your overall credit history, but it also enhances the business relationship with its suppliers and vendors.
The records kept of these transactions provide evidence of a good credit history between you and your vendors. It shows what a great borrower you and your business are.
But if the suppliers don’t report these trade credits to the credit agencies, you won’t actually be building any business credit, so remember to ask them to do so.
3. Separate the business from the owner
Having a business and keeping its finances separate from the personal ones can be a difficult task. As a business owner, you should strive to avoid mixing your business finances with your personal credit histories. Mixing them is called commingling, and it’s definitely a big NO for any business owners and entrepreneurs.
If you use the same bank account neither you nor any lender will be able to distinguish personal from business transactions, and it will be impossible to make a judgment on your creditworthiness.
The first step to separate the two is to open a business bank account.
The records of a business bank account offer a proper analysis of your debts and payments. How you make payments and whether it is on time or not.
Remember: your business and your personal finances need to remain separate, do not commingle.
4. Get a business credit card
Getting a business credit card will do wonders for your business credit. All business transactions such as purchasing supplies, making payments records only appear in the business name.
Just remember, you need to make timely payments and never max out your credit limit. This will show banks that you know how to handle debt and money.
5. Review your business credit report
This is very important, as it will let you know if you’re doing a good job.
If your credit score is going down, you’re definitely not handling debt as you should, and you definitely need to pay more attention to all your debts and its deadlines.
If it is going up, you’re definitely doing something right and you should keep at it!
Are You Ready to Have a Strong Business Credit?
Now you know both the importance of building business credit and how to do it. So wait no more, follow some of our tips and start building business credit so that your entrepreneurial future is brighter than ever.
