4 Simple Steps to Establish Stellar Business Credit

Posted by on March 6, 2013 in Business Financing [ 0 Comments ]

business creditHaving a bad business credit score can seriously hurt your chances of acquiring a small business loan. Dunn and Bradstreet suggests, “When other companies or potential investors take a look at your corporate credit profile, they will have second thoughts about working with you because your business has built a reputation for making irresponsible financial decisions.”

Whether you’re pitching to investors or applying for a loan, you will be asked to present a credit report from one of the major business credit bureaus. You need to prove that your venture would be a reliable investment for the lender.

Related: Run your business credit report, today

And so, it’s important to have a thorough understanding of business credit so that you can take the steps needed to improve it for your company.

Build Your Business Credit Score

Like personal credit, your business credit is ranked on a credit score. Unlike personal scores that are ranked from 300 to 850, business credit scores range on a scale of 0 to 100, where more than 75 is considered to be high.

How high your score is depends on more than how efficient you are with your bill payments. Your business score is based on:

  • Your line of credit
  • How long you have had the profile
  • The amount on your various lines
  • The number of times you have checked your credit

Try not to use your personal credit information when setting up your business’s line of credit. If you do so, you run the risk of greatly lowering your personal score and not getting the credit your business needs to build on.

Related: Debt Management for the Small Business

Form a Corporation or LLC

Operating your business under a corporation or LLC instead of having sole proprietorship may help you to protect your personal credit from your business. If you are listed as the sole owner of your business, you are more susceptible to the possible debts of the business, putting your personal assets at risk.

Business owners of corporations or LLCs have liability protection and their credit completely separate. Apply for an LLC name through the IRS website, obtain an EIN number, and use these to register at business credit agencies.

Related: Incorporate with one of our vendors, today

Use State Small Business Credit Initiative (SSBCI)

President Obama recently signed into law the State Small Business Credit Initiative, which funded state programs that support lending to small businesses. The act helps to get credit-worthy small businesses more funding to help their ventures succeed. SSBCHI allows small business programs and models to grow and support one another.

With support from the government being signed into effect all the time, it’s imperative that your credit is superb so you can take advantage.

Have Credit References

Providing high-quality credit references can be an effective way to get a small business loan supported by a lender. Equipment suppliers, utility or real estate rental companies can all be good references to use if they can provide transaction reports that emphasize your reliability in making payments. It’s important to know who will give you the best credit rating to make the most of that financial relationship.

Once you gain a better understanding of business credit, you will be able to use all the resources available to optimize your credit results. Establishing, maintaining and improving your credit will be necessary to your business success.

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