Most businesses will need to take out a loan at some point in order to help maintain or grow operations. A strong business credit profile makes it easier for business owners to obtain funding when they need it most. Strong business credit is also an important part of attracting new business. Much like a personal credit score, many vendors, customers, partners, and investors will look at a company’s business credit history in order to determine whether or not they want to do business with them.
If you are a new business owner or you have a poor to mediocre personal credit history, you may find it difficult to obtain a business loan from a traditional lender. The good news is that there are a number of ways that you can work to build and improve your business credit, making it easier to grow your business.
Here are 3 tactics that you can use to improve your business credit:
- Establish a business line of credit.
If you are looking for ways to improve your business credit, consider a business line of credit. A business line of credit is helpful for getting business owners and entrepreneurs the money they need to start and grow their businesses, especially when they are not approved for a business loan by other traditional lenders.
Whereas traditional financial institutions look at personal credit history, many alternative lenders will instead examine real-time business data to determine credit worthiness. What’s more is that the loan application process with traditional lenders can often be long and tedious, prolonging the amount of time before business owners can get access to their money. A business line of credit helps newer business owners, those who do not need a large amount of credit, or those without much credit history get the funds they need when they need it.
In addition to providing the necessary funds in a timely manner, a business line of credit can also help business owners improve their credit score. Many alternative lenders offer business lines of credit to newer business owners who do not yet have an established business credit history or those who have less than stellar personal credit scores. A business line of credit can help business owners more easily establish business credit that they can later build on as they grow their business.
- Make credit payments on time or early.
Much like building your personal credit history, one of the best ways to build and improve your business credit is by paying your creditors either on time or early. Each credit bureau uses slightly different methods of determining your credit score. However, all credit bureaus consider your history of making payments to creditors on time. By making your payments on time or early, you can help to make sure you build a good credit score.
Remember, building a strong credit history takes time. Just a few months of on-time payments will not magically raise your business credit score overnight. However, a long history of making early or on-time payments will benefit you in the long run by helping establish a strong and long-lasting business credit history that will show lenders and customers you are a responsible business owner.
- Keep your business public records clean.
Paying your creditors on time is not the only way to build and improve your business credit profile. In addition to credit payments, your business credit report will also contain any public records that have been filed in the name of your business. This includes any bankruptcies, judgments, and liens. If you have a court ruling against your business in a debt collection lawsuit, this will have a significantly negative impact on your business credit.
Bankruptcies can stay on your credit report for up to 10 years. Tax liens, judgments, and other collections can stay on your business credit history for up to 7 years. These negative marks on your business credit report can affect your business credit score and impact you for many years. One of the best ways to improve your business credit score is by avoiding these negative situations that remain on your public business record.
As a new or small business owner or entrepreneur, you can use these tips to start improving your business credit history. Building a strong and positive business credit profile will help you create better opportunities for your small business. In addition to helping you get lower interest rates on business loans and credit cards, your business credit history will also help you get better terms with vendors and suppliers. Customers, investors, and potential partners will also see your long-standing history of credit as a positive factor that will encourage them to do business with you.