Build Your Business Credit Properly can be beneficial for both small and big businesses in a number of ways. Having good business credit will make it simpler and more affordable for you to get various forms of finance, business-related insurance, and vendor payment
arrangements. In addition, many more profitable commercial partnerships may be won by your company, all thanks to strong business credit.
Without any further ado, let’s begin with our simplistic guide to building your credit properly to maximize funding.
How Building a Business Credit is Important?
Good business credit plays a vital role in getting your company approved for loans and other finances. It can further help in securing loans at relatively lower interest rates.
Sometimes, people tend to have this misconception about business credit that if you have strong business credit, the lender may not check the personal credit statements of the owner. This is not true since most business lenders tend to review personal statements and some banks even have policies of submitting a personal statement as a prerequisite in order to qualify for loans.
Why Personal Credit is Significant for Your Business?
If you run a small business, both personal credit and business credit hold significant value to your business. Moreover, you need to remember that it is completely normal for a lender to ask for your personal credit statements in order to qualify you for small business loans.
In this article, we will mainly focus on how to build your business credit but you need to be mindful of the fact that your personal credit matters just the same. Under these circumstances, a heart balm for you is that you can focus on building your business credit despite the fact that your personal statement is not that strong yet.
How to Build Your Business Credit Properly?
A smart way to keep a record of your business credit is to maintain reports of your business credits on a regular basis. One of the most important things to build your business credit is to do business with companies that,
- Have a stable record of their payment history
- Have a record of paying all their finances on time
- Have a record of keeping the loan levels under control
Yes, it really isn’t that complicated. All you need to do is keep above mentioned key factors in your mind while doing business with other companies.
For some business owners, the entire procedure of building credit can turn out to be a little challenging due to some intricacies, therefore, we will outline it here in detail.
Major Steps in Building Your Business Credit
- Set up a solid base
- Register and get your business verified
- Obtain a D.U.N.S number
- Acquire reporting accounts
- Get a credit card specifically for your company
- Pay promptly
- Track and maintain a record of your credits
Let’s dig into each step to see what unfolds!
1. Set up a solid base
Setting up a solid base is important, especially for starter businesses. In order for your business to look professional and authentic, acquire an official number for your business and get it registered in the directory assistance.
Moreover, use a professional email specifically made for your business with a proper P.O. Box address.
2. Register and get your business verified
When you start your business, it is important for you to register it in accordance with the legal requirements set by your state. Each state has its own set of requirements, so check with your particular state and get your business registered as soon as possible.
It is important because it will help you in acquiring the business license and some commercial agencies may check this public information to initiate a credit profile for your company.
3. Obtain a D.U.N.S. number
Your company is identified by a D.U.N.S. number with the credit scoring company “Dun & Bradstreet”. It is completely free and you should immediately request for the number as it ensures that your business is visible to Dun & Bradstreet.
4. Acquire reporting accounts
In order to build your credit for maximizing funding, it is important for you to establish credit accounts with a couple of businesses that report to business credit agencies. This is particularly important since having a record of no payment history with any account may lead to no business credit or an extremely low business credit score.
5. Get a credit card specifically for your company
Getting a credit card for your business can offer you many bank-related perks. However, an important feature is to build your business credit. If you pay your finances on time, business credit cards can build up your credit.
In addition to this, you can also have more than one open business card to help with the increased cash flow.
6. Pay promptly
DBT refers to Days Beyond Terms. It is used by business credit reporters to define any delays in your scheduled payment time.
For instance, if your business with a retailer is net 15 and you pay on day 18, it will be recorded as 3 DBT. This implies that even a minor delay of 1 day can lead to lowering of your credit scores.
7. Track and maintain a record of your credits
We human beings are bound to make mistakes and record-keeping can help us identify those mistakes or patterns that can lead to further errors. If you see that something is not quite working for your business credit, try to find a solution for it at your earliest.
Monitoring your credit progress will help you in a number of ways such as identifying what works best for building up your credit to maximize funding.
Bottom Line
If you want to run a successful and profitable business, then you must have a good business credit score. It tells the other creditors that your business is financially healthy. It will not only make it easy for you to qualify for loans but also increase the likelihood of
postponing prepayments.
A strong credit rating can be used as a negotiating tool to lower costs or get favorable deals and interest rates on loans from banks and credit unions. And that is how you Build Your Business Credit Properly!
