Having a good business credit rating opens up doors for entrepreneurs. Everything from unsecured lines of credit, larger financing amounts, and having to pay less upfront when making large purchases can ensure lasting success from a business. However, new businesses and companies trying to repair debt need to improve their business credit in order to access those benefits. Here are some tips for building better business credit.
Keep business and personal credit separate
Many startup owners have trouble getting approved for traditional bank loans, and resort to using personal credit card to fund their business. This creates a number of problems, the biggest of which is racking up huge personal credit card bills with high interest rates. Business credit lines typically have higher spending limits, as well as relatively lower interest rates. The second issue is that by using personal cards to finance a business, owners are preventing their business credit rating from growing. It is imperative that business owners keep personal and business credit separate.
Secured business credit
When starting off, entrepreneurs may only qualify for secured business credit cards. Like any secured card, the spending limit is directly tied to what is in the bank account. By using this business credit card, and paying off those purchases as soon as possible, people can build business credit rather quickly.
Choose vendors wisely
Some vendors make a point of reporting payments to large credit agencies. It pays to ask before you deal with a vendor, if they will report your payments. This is a quick way to build business credit by establishing a track record of paying your vendors on time or ahead of schedule.
By incorporating or forming an LLC, your business will be able to obtain its tax identification number. This allows entrepreneurs so set up a business bank account, which opens the door to getting lines of business credit a lot faster than building business credit as a sole proprietor. Once the company name is registered, credit agencies will start keeping track of expenses, and if you business pays its bills on time. In no time, your business will be receiving offers for business credit cards with various incentives and promotions.
Check your credit report regularly
Credit agencies are very large organizations, and as such, even they make mistakes now and then. By looking at your business credit report regularly, you will be able to see how your credit is building, and also if there are any irregularities or outstanding marks on the report. The best practice is to get detailed business credit reports from more than one agency to make sure the numbers are the same across the board. If there are amounts on the report that are not associated with your business, you can dispute those charges to get them removed from your business credit report.
By following these guidelines, you will be able to build your business credit rating and have access to greater financing opportunities and purchasing power in no time!