Getting your business off the ground can be a challenge, and with so many factors to consider, it may seem overwhelming. One of the most important aspects is your business credit, as it opens doors for you in terms of finance and funding and can help you to build relationships with suppliers. There are a few things that you can do to help build your credit score, like paying off any short-term loans you may have applied for in the past, establishing your business legally, and opening a company bank account. We’ll look at business credit in more detail, why it’s an essential factor to consider and how to build it up.
What do we mean by business credit?
Business credit is used so that financial lenders know whether you are a trustworthy borrower when it comes to any loans or help you may need in the future. Not only this, but it can also have an impact on your business’s relationships with suppliers – if your credit score is good, you are more likely to be able to use it as a bargaining tool with other businesses. If you are a new business that is looking to build up its credit score, or you have recently reviewed your credit and you would like to improve it, there are a few ways in which you can do this to put you in the best position to succeed. In general, good credit means that your company is successful when it comes to handling its finances and gives both lenders and suppliers an idea of how you operate.
How can you build credit?
If you’re a new company, you may not have a credit score yet because you haven’t had the time or experience to build one up – but don’t worry! There are ways that you can begin to build a positive credit rating that will help boost your company into the best position when it comes to receiving financial help if necessary. If you are a business that has been trading for a while and your credit score is less than impressive, you can use the following ways to help boost your credit to get you to where you want to be.
Check your credit score
The first thing you’re going to have to do is look at your credit score. Companies that have been established for a while will have an individual credit score that allows lenders to look at how prompt they are when it comes to repaying debt, and bills. Business credit scores are different to personal credit scores – they are scored from 0-100. If your score is closer to zero, you may be seen as a high-risk borrower, so you want to get it as close to 100 as possible to show you can make repayments and qualify for finance.
Use a business credit card
One of the ways that you can build up your business credit is to set up a bank account and use a credit card. You should make sure that you keep your business finances, and your personal finances separate, and by opening a business bank account, you can then apply for a credit card to use to help manage your finances. Building a relationship with your bank may also be helpful if you need credit down the line! You should try and use your credit card regularly to build up credit, however, be mindful of your limit, and make sure you pay your bills each month in full and on time.
Pay on time
When it comes to building your credit, this is one of the easiest ways you can increase your score. Making sure that you have the funds to pay your bills on time and in full is crucial. If you can, you should try and pay your bills before the deadline, as this will build your score even faster. This proves to lenders that you are trustworthy and that you have the funds behind you to pay back your loans and keep on top of your bills.
Establish your business
You should ensure, especially if you’re a new business, that you are legally established. You should create a name for your company and set up a phone number – this will help your company with credibility with both suppliers and the government. Doing this means you can start to get your business underway by opening accounts with suppliers and vendors that will help to build your credit report and will make your company known to credit agencies. From here, you should be sure to keep on top of repayments to vendors so that your credit score remains high.
