Having a healthy business credit rating allows businesses to access larger financing options, lower interest rates, an bigger lines of credit. However, building good business credit involves a bit more than simply paying your bills on time. We have compiled a short list of things every business owner can do to build a strong business credit rating in a short period of time.
Secured business credit cards are better than none
When new businesses decide on their corporate structure and register a business name, they are usually inundated with credit card offers. Unfortunately, a business without a credit or financial history has its credit card options whittled down significantly, and many new businesses find themselves left with taking offers for secured credit cards. Much like personal secured credit cards, the amount available is tied directly to the amount of money available in the business bank account. But by following the guidelines and making purchases with these cards, the business credit rating will grow, and in a few months you will be able to accept unsecured credit card agreements.
Stop making business purchases with personal cards
Apart from turning business accounting into a headache by having to track expenses on personal credit cards, this type of purchasing inhibits your business credit rating, while putting personal finances at risk. Personal credit cards have much lower spending limits than business credit cards. Making business purchases or funding a small company with personal cards can be dangerous, because your own cards will be maxed out in no time. This leaves business owners taking a good portion of their profits to pay down cards, which – especially if sales are light in the beginning – can trigger late penalties, and cause their personal credit scores to take a nosedive. Additionally, using personal credit cards inhibits the business credit rating from growing. If you have business credit cards, use them! Even if it’s for a box of paper clips, making small purchases and then paying them off on time will build your business credit rating faster than using personal cards instead.
Review your credit report regularly
Most business owners only get a copy of their credit report when they are applying for business loans. It is wise to go over this report every few months to see how your business credit rating is improving, and if there is anything outstanding that needs to be remedied. More importantly, a detailed credit report will show you if any marks are on there that shouldn’t be. Credit agencies are large organizations, and sometimes outstanding charges can remain on the report, even if they were taken care of a long time ago. By catching these and reaching out to the agencies, those marks can be removed, which will increase your business credit rating.
Building a strong business credit rating is a process, but by following the tips above, it can go a lot faster and painlessly than most people make it out to be.