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Business credit is what enables your business to qualify for financing. Business credit bureaus keep records of the debts businesses had to pay and their credit information, so they have to qualify to get financed just like people do. Creditors, suppliers, insurance companies, and other organizations may all use the credit information when deciding on your business, so it is vital to make sure that your credit is in good shape.
So, how should you develop your business credit?
- Make it official.
Just because you have decided to start your own business does not mean that it has magically become real. To put your business on the map, you need to get an official phone number for your business and have it listed in the directory. Also, you need to open a business bank account using your legal business name and use it to pay any business-related bills.
- Two essential steps to build your commercial credit history.
Firstly, it is crucial to pay the bills on time. And it would be ideal to pay them early. If you do, there is a chance that your business will get some “extra credit” for speedy payments.
Secondly, you should have different accounts to report to various business credit agencies, as not all creditors and vendors report to all of them. If you see that your existing accounts are not helping your scores, you may consider adding other credit references.
Ideally, you will have used less than 30 % of the total available credit before getting approval for more financing.
- Relationships with suppliers and vendors.
If your relationship with your suppliers is good, then you are more likely to avoid paying upfront. Also, if you manage to secure good credit payment terms with just a few suppliers and vendors, you can report these payments to the credit agencies and establish a great business credit history.
- A secured business credit card.
One of the best ways to establish business credit is to open up a business credit card with a creditor that reports to the credit agencies. You should get at least one secured business credit card, even if you do not need to utilize the credit available through the credit card.
Business and personal expenses.
Needless to say, your business credit card and all of the business-related expenses should be separated from all of your personal credit cards and personal expenses. When you need to spend money to enhance your business, make sure that you are using the business account.
All of these steps will make your idea into a legitimate business and help you improve your credit. There are innumerable benefits to having good business credit, so you should take all the sensible steps to make sure that your business has one.
