When your company is only allowed to borrow a few thousand dollars, this might not exactly suffice when you need to pump cash into new product or equipment. More than ever, this is the time when a good business credit score will need satisfying approvals for your credit requests. If you have yet to establish a business credit (or if you have a low score), then there might be a need for you or your company to do some research before reaching out to lenders.
- Ensure that you have a good personal credit rating.
During the early days of your business, financial institutions will rely on your personal credit history to get an idea with relation to your risk account. It is common practice for lenders to check the individual credit of a business partner who supports a stake exceeding 20% in the business. In case your score isn’t over 630, work to improve it, whether this means slashing the balance on your own cards to less than 30% of your limit or paying bills on time.
However, you may have to provide a personal guarantee initially, apply for business credit, and keep your personal and business credit separate to make the most available benefits. Other business lending options and credit card repayments won’t be factored in your personal credit, your score won’t be afflicted in any way by your business debt.
- Get listed to determine your business credentials
After you have created your corporate structure, the next step that should ultimately be on your list is to put up your contact number on the directory assistance listings with your business name. Also confirm if you have the appropriate permits that serve as proof that your business is legitimate and credible.
Get in touch with your mobile phone service provider to re-register your mobile phone number to reflect your business name and EIN. Follow suit with equipment leases and any vehicles. By looking into timely monthly payments to these services, you can start building a positive credit pattern early on.
- Register your business with 3 business credit bureaus
Signing up at Dun and Bradstreet, Experian and Equifax is free, and can be easily completed at the respective websites using your Employer Identification Number (EIN). This is a necessary step to initiate the official tracking of business credit.
- Explore your options in business charge cards and lines of credit
Set a meeting with the manager of the local bank to discuss the financial products you are eligible for. You can either opt for a major bank or a small financial institution; the former is sure to have a larger product portfolio, while the latter probably will provide personal attention and bespoke solutions to get your patronage. A good banking history with regular deposits and healthy lender balances can boost your chances of getting credit without much hassle.
You can also get credit lines through a local credit union. To identify options aside from banks and credit unions, check with your local SBA office. They can point one to asset-based lenders who mainly consider collateral as opposed to your attractiveness to a lender,.
- Register your invoicing cycle with credit-reporting agencies
If you haven’t already created an invoicing cycle with frequent suppliers, request for a change and register the billing with credit agencies. An invoicing cycle is a win for both you and the supplier. You can receive supplies and still have 60 days to help make the repayment. Billing cycles help suppliers show steady income and strengthen their own credit histories.
- Don’t hold off on setting up credit
To build credit fast, apply for it soon after you set up your business. Banks and lenders are partial to businesses which may have established themselves for at least two years. Apply for a personal loan or get a business credit card to get the ball rolling. Consider a guaranteed credit card with a low limit if you are unsuccessful to get financing or the loan you applied for. Another option is to secure a commercial credit account with major retailers to get started on building a credit score.
- Do not forget to read the terms and conditions of the loan carefully
Ensure that the overall cost is not too high. In case you have applied for a business credit card, look into the interest rates carefully and choose products that provide you competitive terms. The last thing you want is to sign up with a lender who charges an increased default rate for missed payments or a sizable outstanding debt.
- Use business credit cards prudently
While a small business credit card is a great tool to meet constant capital requirements and build your credit history, it could really be a double-edged sword if you rake up a relatively huge debt. Besides making sure that an individual has a huge balance, here are a couple more tips to consider when you shop for a business credit card:
Check out the rewards offered by different cards. Some credit card companies offer excellent initial rewards and bonus points, which is often used to pay toward a campaign or business trip.
See if you will get products offering introductory rates on purchases and balance transfers. This kind of is a great opportunity to pay off debt faster.
Leverage business credit cards primarily based on the type of transaction. For example, you can use a business rewards card for day-to-day expenses, and set it with a zero-interest personal card for financing.
As the payment information business credit history is more detailed than in individual/consumer reports, it helps if you can settle repayments before they turn into liabilities. This is to provide a good image and bolster your creditworthiness.
Errors on business credit reports are very common, so it is in your best interest to keep an eye on your own from time to time.