Can I Build Business Credit Fast?

Can I Build Business Credit Fast?

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Even though credit is an important factor in both personal and business finances, the true magnitude of its importance is not always realized until it’s needed.  If you’re a business owner with a less than desirable credit score, one of your first questions may be “How can I build business credit fast?”

The is truth is, there is no magic solution. You can’t improve your credit overnight; in fact, it often takes months or years to reach the level of business credit that banks require to begin working with you. However, there are a few things you can start doing today to help give your credit a boost as quickly as possible.

Register Your Company

You can’t build business credit until your business is officially recognized as such. If you haven’t done so already, you need to register your company with the IRS and obtain a tax ID number (EIN).  You’ll also want to obtain a D&B D-U-N-S number which you can obtain straight from your Nav account.

Check For Mistakes and Fix Them

Monitor your personal and business credit reports to make sure they are accurate. If information in your one of your reports is wrong, any credit scores calculated from that information will also be wrong. If you find mistakes, dispute them.  The Credit Sweeper tool in your Nav account can help.

Decrease Debt Utilization

If you already have a business credit card or trade lines established, check your report to see what your total credit utilization is like. Your credit utilization ratio is an indicator for creditors that shows how well your business manages your available credit, and you should aim to keep your business credit utilization under 50%.

If you don’t yet have a payment account attached to your business, starting one now can be a step towards establishing your business credit history.

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Ask Suppliers to Report Your Payments

Do you have a good relationship with your key suppliers? If so, it’d be in your best interest to start  utilizing your regular payments to build your business credit. Similar to making regular payments on a loan, showing creditors that you can maintain regular payments to your suppliers also signifies that you are a responsible and trustworthy business.

In order to do this, you’ll need to verify that your suppliers do and will report payments to the credit bureaus. If you’re just starting to shop around for the best suppliers, inquire about whether or not they report to business credit bureaus, and try to form a working relationship with a supplier who does. You can also find a list of companies that report to business credit reporting agencies in the Business Launcher tool of your Nav account.

Build a Solid Relationship with A Financial Institution

Building a positive relationship with your bank or credit union is important for a couple of reasons. If you apply for a loan or other types of financing, you may have to provide financial information, including account statements. You’ll want to be able to demonstrate a record of solid cash flow in a business account.

One way to build credit and prove your company as trustworthy is to obtain a business credit card or line of credit and pay it back early. These payments will be reported to the credit bureaus, you will start building a solid payment history, and it will prove that, as a business, you’re likely to pay back larger loans in the future. If your business is too young to qualify for a loan, ask your financial institution whether a secured loan is a possibility.

Take Care of Your Personal Credit

For small business owners, personal credit can have a huge impact on your business credit.  In fact, the FICO SBSS Score, which is the business credit score that the SBA uses to prequalify many of their loan applicants, uses personal credit as a major factor in its scoring model.

It’s easy to focus all your time and energy on your business, but don’t let your personal credit suffer. Maintaining good personal credit will help you build or maintain good business credit. Read about the main personal credit scoring factors here.

Establish an Emergency Fund Before You Need It

One of the most frustrating situations a business owner can encounter is one where you need funds quickly but can’t access them. Thus, it’s always best to apply for things like credit cards and credit lines before you need them.  Having access to emergency cash can help you avoid the stress that comes when you need it the most.

Check your SIC and NAICS Codes

Did you know that your industry’s risk is a factor influencing your business credit score? And TONS of businesses have the wrong SIC or NAICS code associated with their business. If your business is falsely listed under a riskier industry, now would be a great time to correct that code.

“I’ve done all that, now what?”  

First of all, congratulations on taking the most important steps in building good business credit.  If you’ve managed to check off every item on the list and still find that your business credit scores aren’t rising  as fast as you’d like, don’t give up.

Building credit is process that takes time, and while there are things you can do to expedite some aspects of it, others will just take time.

Building a credit rating takes time, but tools like Nav can make the process easier and more effective. And while it may seem like it takes forever, if you are proactive, you can make significant process in as little as a year or two.

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About the Author — Jennifer is a alum of the University of Denver. While in the graduate program there, she enjoyed spending time identifying ways in which non-profits and small businesses could develop into strong and profitable organizations that while promoting strong community growth. She also enjoys finding unique ways for freelancers and start-up businesses to reach and expand their goals.

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