Your business credit not only helps you get access to essential financing, but also supports you in securing better deals on loans and insurance plans. Besides being an identifier of your credibility to lenders, it also helps potential business partners gauge the reliability of your company.
But if you have not established your business credit yet, you may find the very idea to be full of stress. With that being said, you only need a little guidance to overcome this fear and fulfill your goal of having good business credit.
The following guide sheds light on business credit and how you can build it fast.
How Does Business Credit Differ From Personal Credit?
While your personal credit reflects on how you handle your money as an individual, your business credit is all about how your company conducts its financial operations. With that being said, if you don’t have an established business credit history, lenders and financiers may look at your personal credit history to determine if you are a reliable partner to work with who could follow investment strategies during economic uncertainty.
How to Build and Improve Business Credit?
In order to follow tips on how to check credit score for your business, you first need to build business credit and then improve it. This process can take at least 6 months. While you can start your business’ credit history with a credit account like a business loan, you have to take certain steps to establish your credit.
Building Your Business Credit
The following practices can help you with building your business credit. This is no more difficult than using simple solutions like a business account platform to streamline your operations.
Register Your Business
The first step for building business credit is also the most obvious: You need to register your business. Depending upon how your business is set up, you can choose from different business structures like a partnership.
Obtain an EIN
Whether you are finding ways to prepare your finances for a recession or making plans to grow your business, you need an employer identification number (EIN). This number is issued by the IRS.
Get Your D-U-N-S Number
Your D-U-N-S Number is a unique identifier that helps establish your business’ operations at its physical location. This helps lenders and partners find your business’ information and makes it easier to track your credit score.
Open a Business Account
Similar to a team management platform that organizes your operation, a business account separates your personal and business finances. This is important for tracking your business payments.
Get a Credit Account
After you have completed the above steps, you can open a credit account like a credit card. But before you choose a lender, turn to product recommendations like Notion app review in order to do your own research.
Improving Your Business Credit
Once you have taken the steps to build your business credit, you can start improving it. For this, you can take the following actions.
Never Delay Payments
Whatever you do, always make your loan, credit card, and even your usual vendor payments on time. This simple action can work wonders for improving your credit score.
Report All Transactions
Whether you use a subscription management app or have an in-house accountant, you should report all of your trade transactions. This can strengthen your status as a credible business.
Keep a Low Credit Utilization Ratio
Your credit utilization ratio is a representation of how much funds you use from the credit approved for you by lenders. By default, you should keep it under 30% at all times.
Monitor Your Business Credit
It is essential that you monitor your business credit on an ongoing basis. This helps you see how your actions are affecting your credit report. You can also dispute misreported transactions that impact your credit.
With these steps, you can build your business credit within a few months. The more that you follow financial best practices, the better your score can be in the long run.