Building Business Credit in 5 Simple Steps
Building business credit is one of the first things you’ll want to do as a new business owner. You’ll come to rely on this credit for financing during slow periods, for unexpected financial emergencies, to grow your venture, and many other reasons. You can build up to a positive score by doing five simple things.
1. Make Sure the Major Credit Bureaus Know You
Scoring your business creditworthiness works differently than your personal credit and also works through one different agency. Yes, Equifax and Experian assess businesses, but you also want to make certain you’re recognized by Dun & Bradstreet. Keep your information up to date at all three agencies, including your business financials and company data.
2. Build Credit Through Your Vendors
Ask your vendors if you can obtain your supplies using trade credit. This is much like charging something. You get the goods but have time to pay for them. Most credit terms are a few days to a few weeks, so you’ll need to pay for your supplies in short order. Still, if your vendors report to the bureaus that you’re making your payments on time, it’ll help establish your score.
3. Don’t Be Late
In trade or traditional credit, do not make your payments late. Just like your personal credit, you must make your business payments on time or face a negative mark on your report. In fact, Dun & Bradstreet gives higher business credit scores to companies who pay their invoicing early, so the sooner the better when it comes to your accounts payables.
4. Get a Loan
This might seem like odd advice, but if you borrow money from financers that report to the major credit bureaus, you’ve just found a way to improve your score quickly. Find out which lenders report to the big three, and then borrow money and pay it back, whether you need it or not. Show others that you can be relied upon when it’s time to ask them to extend you credit.
5. Maintain a Good Public Record Profile
Bankruptcies, judgments, and liens affect your business score as much as they affect your personal score. You must keep your public records clean to build solid credit for your business. Keep your business and personal finances separate, and avoid having anything tarnish your business name. A lien against your company tells financers you don’t pay your bills.
Follow these five approaches to build and keep your business credit score strong. You never when you’ll need to borrow money for your venture.