Though business loans are granted based on a variety of factors, at the end of the day, it all comes down to one thing: perceived credibility. Do you have a financially sound background? Are you and your business a worthwhile risk? To answer these questions, lenders most always refer to credit scores, whether that be consumer or business. But what if, to your embarrassment, your credit isn’t so hot or you haven’t really established business credit?
Just because you haven’t established business credit doesn’t mean you’re out of luck. You can still apply for financing using your personal consumer credit history if it’s solid enough, but it’s a good idea to establish business credit as well. Don’t know if you have business credit or what your business credit scores may be? You can check your business credit scores here. Here are a few tips to help you improve or establish your business credit.
Act the Part
Fake it till you make it. OK, not really – but if you truly want to build business credit, you need to establish that your business is, in fact, a real entity, one that’s ready and open for business.
To do that, consider opening a business credit card, acquiring an EIN (Federal Tax Identification Number), and setting up utility and banking accounts in the name of your business.
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Make Timely Payments
Opening a business credit card is one of the most effective ways to begin to build business credit, but of course, there are a few caveats. When used wisely, a business credit card can help you build business credit and solid credit scores fairly quickly. The key thing to keep in mind is that you are building credit, so if you do open a business credit card, don’t jeopardize your business, or the score you’re nurturing, by overextending yourself or missing payments.
Cultivate Good Relationships
The benefits of good business relationships are many, but when it comes to business credit, being in good standings with suppliers and vendors can unlock flexible payment terms and lines of credit, both of which can open up access to products and services without having to pay upfront.
Additionally, if you build relationships with vendors and suppliers that report to the major credit reporting agencies – and you should – you will begin to establish that sought after credit history, and if you’re paying on time, or early, the attached credit score will become stronger and stronger.
Keep an Eye On Your Credit Report
Monitoring your credit – both your business and personal consumer credit – particularly in today’s economy, is an important step in avoiding bad credit. Mistakes do happen, and if they show up on your credit report, you can be forced to deal with the destructive aftermath. Monitoring will give you the chance to refute false claims immediately. Furthermore, monitoring your credit, in general, is an important activity for consumers and business owners alike and should always remain a priority.
Applying for loans is often a necessary part of owning and operating a business, but approvals and good loan terms require a positive business presence, including business formalities (i.e., EINs, directory listings, etc.) and a history of timely and consistent payment activity. Obtaining those things may take time, but they can be well within your reach, and once completed, lenders will see you really do exist and that you’re an eligible loan candidate.
Ready to see your credit data and start building better business credit? Check Your Personal and Business Credit For Free (No Credit Card Required).