Running a small business takes much hard work and dedication. Of course, it also takes money. Establishing good credit is essential to the survival of your company. It’s important to know how to build business credit. Here are some ways you can do that.
Establish Your Business Credit
It’s important to first check your own personal credit as well as your business credit. Get copies of your free credit reports and check them for potential errors.
Keep in mind that when you want to apply for small business loans, the lenders will want to know that you have good personal credit to ensure that you are low risk.
According to the experts at Lantern Credit, “There’s no fee or obligation, and it won’t impact your credit.”
If you don’t find anything in your business credit report, it means you haven’t yet established business credit.
This often occurs if you only use your personal credit card to pay for business expenses. You should do the following to establish business credit:
• Incorporate your business or form an LLC
• Get a federal employer identification number for your business
• Open a business bank account
• Get a business phone line
• Register with Dun and Bradstreet to get a D-U-N-S number
Apply for a Business Credit Card
One of the best ways to establish business credit is to apply for a business credit card. Once you start using it, your usage will be reported to the major credit bureaus.
There are cards specifically available for business use. Some of them offer a variety of rewards that encourage you to use them more. Many of those features are beneficial to business owners versus the types of rewards that entice personal use.
Also read:- How to Buy a House with Bad Credit
Fortunately, there are plenty of options available to you regarding business credit cards.
Work with Vendors That Report Payments
It’s wise to work with vendors that report all your business payments to the credit bureaus. This is the way you steadily build your business credit. However, not all vendors report business credit usage to the bureaus.
It’s important to ensure that the ones you work with do report your payments. If they don’t, you might want to switch to different vendors or at least open new accounts with those who report.
Pay Vendors Early
You want to secure a good business credit score. Dun and Bradstreet’s PAYDEX scores range from 1 to 100 and are based on your payment history. If you pay your vendors early, you can secure yourself a good score of at least 80. The earlier you pay, the better your business credit score and reputation.
Monitor Your Business Credit Report
Just as you should do with your personal credit, it’s important to regularly monitor your business credit reports.
Check them often for mistakes and report them to the credit bureaus if you spot any. The sooner they are corrected, the better it will be for your business.
When you are diligent about all of these steps, you will notice your business credit is not only established, but it will also improve over time.
As you practice these responsible methods, you will also be more likely to successfully secure small business loans to further your company.