Simple Credit Building Hacks for Your Small Business
20 Jul, 2017 / Comments: Comments Off on Simple Credit Building Hacks for Your Small Business / By William Mahnic
You hear constantly about the importance of a good personal credit score. Did you know that your small business has a credit score as well? The credit of your small business is just as important as your personal credit. A better credit score will help you to secure better interest rates on loans, get better trade terms with suppliers and decrease the instances in which you might need to prepay for products or services. Building your credit will take some time and effort, but it doesn’t have to be difficult. Here are 6 tips on how to build up credit for your small business.
Take a Look at Your Personal Score
Most new small businesses need a loan to get started. The only thing that the banks will have to go on in the beginning stages is your own personal credit. Many banks tend to look for a credit score of at least the mid-600s. A better personal credit score will help to open up more financing opportunities. This is crucial in the early stages of starting your small business.
Get Your Business on the Map
There’s more to opening a business than simply hanging an open sign on the door so you will have to make sure that you establish yourself as a business. Incorporate your business or set it up as an LLC. Your tax advisor will be able to help you determine the best course of action for your business. You will also need to obtain and FEIN (Federal Employer Identification Number) for tax purposes, set up a business phone number (and have it listed) and open a bank account in your company’s name. Use this account to pay your bills, your employees and yourself.
Apply for Credit Early
In order to begin building credit you will need to open some sort of credit. You can do this in the form of a business credit card or as a line of credit with a vendor. Doing this as soon as possible will allow you to begin building your credit history right away. Make sure that any credit cards or lines of credit that you open report to the business bureaus.
Establish Relationships with More than One Lender
You may want to consider having relationships with more than one lender. Larger banks can change their lending policies or potentially cut your credit limit at a moment’s notice. Spreading out among at least a couple of different lenders can save you in the event of a major change. You could open a credit card with a large bank and a line of credit with a smaller credit union. Large banks offer a number of products and rewards, but smaller banks offer you the benefit of being able to speak to the person assembling your loan package.
Pay Bills on Time
Paying bills on time is critical to building your credit. Doing so shows that you are reliable and that you are able to manage your debts. Personal credit cards may give you 30 days to make a payment before the late payment hits your credit score but your business credit score can be dinged even if you are only a day late.
Find Out if You Have a DUNS
A DUNS number is issued by Dun and Bradstreet. Dun and Bradstreet are a business data and credit reporting agency. Their PAYDEX score is used for many trade credit applications and the number is often required to apply for corporate credit. You can easily set up a file if you do not already have one. You can also list credit references (such as vendors or suppliers) to help boost your profile.
Establishing and building your small business’ credit is important and it is also important that you monitor your credit score. Regular monitoring will help you to update information and report discrepancies in a timely manner. The bottom line is that you need to establish a payment history so it is important to get started as soon as possible.