Methods for Building Good Business Credit
Having good business credit is essential to building your company. Not only will a good credit rating open more doors for your business financially, it can also give you lower rates on loans and can lead to lower rates for your company’s credit cards. There are several ways to build up your credit and give your business a leg up.
Have Good Personal Credit
When you’re starting your own business, having good personal credit is often key to securing small business loans. If your personal credit is not on par with the lender’s requirements, they may be reluctant to grant you a start-up a loan. Keeping up with your personal payments can go a long way to building business credit.
Start Building Credit Before It’s Needed
It’s important to begin building business credit before your company needs it for a major purchase. Apply for a credit card soon after your company’s start up and use it to make purchases. Even a low credit limit, retailer-based credit card can be helpful. Use the card to purchase office supplies, while establishing a valuable credit history.
Once you have a credit card for your business and you have begun to use it, make sure you make the payments on-time, every time. Never missing a payment can go a long way to establishing good business credit. Making sure to pay more than the minimum payment is also a great way to establish a positive payment history.
Diversify Your Lending Partnerships
While retailer credit cards are a great way to start building your company’s credit, it’s important to have connections to more than one lender. A major bank or even a local credit union can provide credit cards or even small business loans. Having more than one lending partner not only provides diversity for your business’ credit report but also protects you from sudden changes or reduced credit limits.
If your company uses vendors for any goods or services, maintaining your relationships with them is not only good for business, it’s also good for your business credit. Consistently keeping up-to-date with payments to the companies you work with can go a long way toward improving your line of credit in the future. Building a good rapport with vendors over several years is essential if you want to avoid pre-paying for goods and services. Many vendors will send partners to collection agencies if need be. Staying off those lists is helpful when applying for larger business loans down the road.