How to Build Business Credit?

Undoubtedly, a high company credit score can benefit your ability to negotiate more advantageous terms with suppliers, acquire lower rates on business insurance, and obtain better loan arrangements.

However, businesses don't just have good credit from the beginning; you need to develop business credit from scratch or restore it if your company needs help with cash flow and late payments.

Additionally, having a bad credit history can affect insurance costs and your company's appeal to potential customers, suppliers, and vendors. Therefore, the following are the simple ways that can help you build your business credit: '

Register Your Business

For brand-new business owners, registering your company is the first step in building business credit. This procedure will change depending on your business structure and where you live. The IRS is another place to apply for an employer identification number or EIN. Building business credit does not require having this business tax ID, although the IRS does need it for most enterprises.

Apply For a Business Credit Card

Since business card issuers base approval on your personal credit history, you can obtain one without a solid business credit history. A protected business credit card, which needs a deposit and can often be switched to an unprotected card with a satisfactory payment history, is an option for business owners with bad personal credit.

Apply For a DUNS Number

You require a DUNS number to obtain a credit score for business from Dun & Bradstreet, one of the central business credit bureaus. On Dun & Bradstreet's website, you can request a DUNS number for nothing.

Before agreeing to do business with you, lenders and other companies frequently utilize this unique nine-digit number to check your company's credit history and financial standing. You must also have a DUNS number to apply for any federal grant.

Maintain Good Business Credit History

The advantage of having an established financial history belongs to existing enterprises. However, a new company's ability to obtain a loan is primarily determined by the owner's creditworthiness. While not all owners of small businesses have excellent credit, some may still be building credit. People with little credit history can get started with the help of the Consumer Financial Protection Bureau's (CFPB) advice.

Pay Creditors On Time

Only businesses that pay on time receive flawless Paydex scores from Dun & Bradstreet, which evaluates a company's payment history. The duration of your credit history and credit utilization are other criteria that affect your business credit score. Keep your connections with your creditors strong and use at most 30% of the credit you have access to, including business credit cards and lines of credit.

Monitor Your Credit

Monitoring your personal and corporate credit reports simultaneously is crucial, particularly if you suspect that you have been the victim of identity theft. Visit the website for the Annual Credit Report, the only place authorized to provide the free reports mandated by law to keep track of your credit.

Set Up Trade Lines

Trade credit is sometimes offered by suppliers, allowing you to make payments multiple days or weeks after receiving the merchandise. If your supplier submits payments to a business credit agency, this account-payable relationship can improve your business credit score.

You can establish trade lines with any small vendor, such as the water or office supplies distributor. You can use such vendors as trade references on your account if they don't report to credit bureaus, and Dun & Bradstreet will follow up to get your trade data.

Conclusion

Building business credit for your venture requires straightforward efforts and steps that can help you professionally establish your business. If you still require more professional guidance in the same aspect, join our Business Finance Coaching program to learn directly from the experts.