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Business credit is vital for every and any small businesses out there today. It provides a record of their business credit management capabilites for banks, lenders and other insitutions to see. Many business owners have bad credit, or they just have no credit, and they don’t realize how much they need it until they’re rejected for a loan.
There are many benefits of having proper business credit.
Learning how to build business credit is simple. There are many financal institutions, like Camino Financial, that can help you learn how. However, it can be challenging for a small business to build it, as it takes time and meticulous planning and implementation.
This is especially in regards to continuous financial operations that can be cumbersome for some small business owners.
If aiming to scale up and have a better business operations future, then it is time that you consider building a credit history. Without credit, your business has no access to loans, which means not being able to grow.
Even if you can access financing, some lenders charge higher fees to people with bad credit, this means spending even more money.
Why is it necessary to build a business credit history?
Knowing how to build your credit history may be additional knowledge, but you will most definitely not regret it. It has many benefits which can help your business prosper.
Here are some of the benefits associated with a credit history:
- Applications for small business loans have better issuance odds with investment amounts increasing.
- Business credit is easily accessible without personal accounts or guarantees.
- The business enjoys lower rates on the loans, company insurance and credit cards.
- Improves business relationships with vendors, suppliers and even improves the odds of acquiring a lease.
- ● Creates value in the business as it becomes an asset in the long run.
How to build business credit
Even with the amazing benefits attached to business credit, some businesses stilldon’t know how to build a their credit history.
You need to start with establishing the businesses credit files then proceed to develop businesses credit.
1. Know what your credit is, is it excelent, good or bad?
To establish business credit, you should do comprehensive research on credit bureau companies. The companies are responsible for rating and providing the business credit score. You can start by getting your actual credit score. This way you’ll know what you’re working with.
2. Start working towards a better score
There are some basic steps you can take to start building the foundations of what will be a perfect credit score:
- Incorporate your business, this makes it an independent entity and separates it from you (the business owner).
- Get the business’s federal tax identification number (EIN); this is needed for filing taxes, opening the business’s bank accounts and in compliance with the law.
- Open a business bank account, which will be used for all financial transactions that the business conducts. Remember, commingling your business’ finances and your own is never a good idea.
2. Building your business credit
Now you need to start building your business’ credit score. To do so, here are some pointers:
- Get a business credit card and exercise responsible behavior in its use.
- Get two or more cards for lowering credit utilization.
- Get information on credit card rewards, fees, interest rates, benefits, etc.
- Use for business purposes only.
- Pay early if not on time.
- Never use your business credit card’s max amount.
- Get new credit lines with business vendors and other suppliers for all business goods and other supplies. Ensure they report to credit bureaus.
- Ensure continuous monitoring of the business credit reports regularly.
It’s always a good day to start building your business’ credit score
Good business credit takes time to come to fruition. Starting early means that you get to enjoy the fruits before the business is in its prime. Even if it’s not for a loan, good business credit is an asset and can have generous profits.
Build your business credit today and reap the benefits in the near future!