It is vital to build business credit. Either you are a new business owner or an established business facility. Not only does improving your business credit benefit your business when you need to get financing, but it affects the suppliers you work with, future business loans, among other things. Thus, it is important to ensure that you have a good business credit score or improve on the current one that you have. So how do you go about building your credit? One way you can try is to search for companies that help build business credit. In this article are various ways that can be helpful to business owners to build their business credit.
- Separate personal credit from business credit
This is a great tip if you want to build business credit as it will separate your personal credits from the business and your credits. Thus, your business can create a different credit file from your other credits. In this way, your business can build a long-term business credit file with various lending institutions. Plus, when you pay on time and have a healthy business relationship with them, your business credit score will go higher, making your business credit score increase.
- Automate all payments
Although many people automate recurring payments, having to automate all payments will help you pay on time, and it is a great business skill to have. This is possible, especially now that technology allows us to be in a position to automate payments, and you do not have to keep remembering which one is due and which is not. In this way, you will not only create a better relationship with your partners as you are on time and trustworthy but also build your business credit score for future business credits.
- Open a sole business bank account
Opening a sole business bank account is another great way to build company credit. This will help you separate your business finances and personal finances. In this way, you will successfully build credit for your business that you can track. Also, you will know whether it is having an excellent score or you need to improve it. Additionally, this business account will help show business credit bureaus the various funds that you transact for the financial benefit of the company. Through this, they are beneficial in building business credit for the company.
- Get a company credit card
To start you off, apply for a card with a low credit limit. Monthly, charge on it and pay it off. Through doing this for a while. After a year, you can request an increase in your credit limit on your business card. In this way, you will establish the creditworthiness of your business, and you can use it as leverage for more credit than you need elsewhere. Additionally, while you have this card, keep the utilization below 30%. This is best to ensure you maintain a good credit report. Plus, other than have a large line of credit that you always max out, it is better to have multiple credit cards that have a lower utilization rate to maintain a good business credit score.
- Pay debts fast
In case you have any debt, you should pay them off fast. More so, debt that you have to pay subcontractors and vendors. Through this, you create trust and goodwill, and when you are evaluating your credit rating, you can reach these vendors to help you boost your business credit score. Plus, when you get to a habit of paying your debts quickly, your business credit rating will increase automatically. Importantly, regularly review your debt ratio as banks evaluate this when they offer credit lines.
- Borrow responsibly
To build your business credit is not about only making the payments on time or clearing off your debts quickly. Borrowing responsibly also counts. Hence you can try to borrow different types of capital in various amounts. This will show your responsible and how capable you can manage as you borrow different amounts. Plus, lenders find it easy to lend money to people that have the experience of seeking capital in various sizes amounts.
- Have trade lines with businesses
If you want to build credit for your business, have trade lines with other businesses by engaging with them continuously, and ensure you pay your bills on time. For instance, you can lease a vehicle in the name of the company, and also it is necessary to maintain a corporate credit card that you do not attach to your credit. Additionally, check the score with reporting agencies every three months to monitor if there any changes that you should consider.
- Build a banking relationship
As soon as you can, it is best to start building a banking relationship. Having a great banking relationship with a retailer who is familiar with your business is very important. So, the longer you have fostered a relationship with retail banking, the more understanding, and trust there is. In this way, easy access to capital and an increase in credit lines. So, gradually you will build strong business credit if you maintain the trust and business relationship.
- Start with a trade account
If you have a tax identification number and your business is an established entity. As a business owner, it gets easier to start building business credit immediately. When you have a trade account, it will provide your business with credit, and also report to the bureaus responsible for business credit. so when you pay on time, the more the chances of building your business credit.
In conclusion, it is important to build business credit, and the tips above will help you. Even when your business is new and taking a loan is not a priority yet. In the future, the need may arise, and you will have to figure out how best to access business credit and financing. For instance, when you need you to get new expansion strategies, having a good business credit profile will be essential to make your business plans a success.