Credit is used by businesses just as readily as it’s used by individuals. Just as you, as an individual, have a credit score that is used by lenders to see which loans and credit agreements you are considered trustworthy enough to apply for, the same is true for your business. However, the rules work just a little differently for your business, so here are a few steps you can take to build your business credit.
Establish Your Business Financially
First of all, the more “established” your business is as a financial entity, the better that it is for your business. To that end, incorporating your business makes it legally distinct from you as an individual, which means your business credit doesn’t tie in so closely to your personal credit, and sites like Zen Business can help you make the move to an LLC. You should also make sure to open a business bank account that keeps your finances separate from your business’s finances.
Get a Business Credit Card and Credit File
The best way to start building your credit is to start showing the evidence that you can, indeed, be trusted with it. You should, first of all, open a business credit file with all of the major credit reporting agencies. A business credit card, however, is where you can start showing your trustworthiness. With sites like Compare Credit, you can compare cards and see which is best for businesses that are just starting to build their credit history. As your business credit score rises, so too should your ability to apply for cards with better terms.
Establish a Long-Term Vendor Relationship
Credit cards are not the only type of credit agreement. There are business loans, but it’s only worth taking these out when you have specific plans on how to use that money, such as when you are scaling your business. Otherwise, you should get in touch with some of the vendors, suppliers, or service providers that you rely on the most. If you can get them to agree to put you on credit for a long-term deal, then being able to follow that agreement can be an excellent credit booster. It may also work out cheaper than just purchasing directly from them time and time again.
Make Sure You Pay Everything on Time
Most importantly, you need to ensure that you’re paying whatever you owe on time. Set reminders for dates for accounts payable, or use software that keeps you up to date on upcoming payments every day. Track your cash flow so that you’re playing close attention to not just how much you have in your bank account, but also to how much you are expecting to pay or receive in the weeks coming up.
If you want to apply for loans, to use a good business credit card, or otherwise negotiate long-term credit agreements, you need to start building your business credit. Hopefully, the tips above give you some ideas on how to do that.