How To Build Business Credit

 

How to Build Business Credit

Building business credit takes time. Too many accounts open in a short period of time will negatively impact your credit rating. To avoid this problem, space out your business loan applications and credit card applications. Here are some tips to start building your business credit:

Paying all creditors on time

There are many steps you can take to improve your business credit score. One of the best ways is to pay all bills on time, and you can do this by setting reminders so you're sure to pay your bills on time. Avoid paying just the minimum amount - always pay the full amount when you can. If you can't manage your cash flow, consider taking out a working capital loan to help with your cash flow and your business credit score.

Setting up a registered business entity

When starting a business, setting up a registered business entity (RBE) is a critical step in building your business's credit history. An RBE is a company that is separate from the owner's personal finances, allowing creditors and customers to view the business' credit report without seeing personal information. For this reason, setting up an RBE can improve your business's chances of securing financing.

Opening accounts with vendors that report payments to the business credit bureaus

Getting a tradeline with a vendor is an excellent way to build business credit. While not all vendors report to business credit bureaus, many do. Make sure you check with each vendor to make sure they report to one or more of these bureaus. For example, if you regularly purchase office supplies, you might want to open accounts with companies that sell school supplies. You may also want to look into home goods and electronics, but you shouldn't rely solely on these providers.

Getting a secured business credit card

Getting a secured business credit card is a great way to start building your business's credit history. These cards are designed specifically for business owners to build their credit history and may be a better choice for small business owners who do not qualify for unsecured cards. When applying for a credit card for your business, make sure to review the terms and conditions, as well as the deposit minimums.

Updating your business credit profile frequently

Updating your business credit profile frequently can help you stay on top of any mistakes in your report. Even minor errors can make qualifying for credit harder. Fortunately, the major business credit reporting agencies have processes for disputing errors. The ratio of your business debt to total credit is a major factor in your credit ability. The lower the ratio, the less risky you appear to be. Make sure to submit disputes to all business credit agencies if you discover any.