Establishing business credit is a process that requires time, patience and some proactive strategy. Despite that it’s not always possible to build business credit fast, it’s an important goal to work toward; simply so you can have more choices over your small business funding options, and the partners you choose to work with to support those needs.
Here are a few simple steps to help you understand how to build credit for your small business.
Establish Distinct Financial Accounts for Your Business
Establishing business credit begins with separating your personal finances from those related to your business. Though the details of your deposit accounts will not be included in your business credit history, some major business credit bureaus may analyze public records that could indicate your business’s financial health as part of the risk assessments they compile about your business.
Apply for Credit
Opening at least one major business credit card in your company’s name and making timely payments on the card can help you build credit fast, but it’s important to manage how much of your credit you use:
- Limit purchases only to business expenses you could pay for in cash.
- Pay balances in full each month to avoid interest rate charges.
- Try to use no more than 50 percent of your credit line.
That said, establishing business credit with a major credit card may not be possible if your business has no established credit history to date, or has bad credit as a result of some past financial missteps. If your business is in either scenario, try to build your credit history through trade lines and credit relationships with vendors you purchase from often, provided they report their credit accounts to the major credit bureaus.
Though understanding how to build small business credit is important, Lendr understands that establishing business credit isn’t your primary goal — or that an entrepreneur who has mastered how to build credit for small business isn’t necessarily an ideal candidate for small business funding.
That’s why Lendr’s small business funding application criteria requires that clients meet these and a few other simple requirements:
- Credit score of at least 520
- Been in business for at least 12 months
- Generate $10,000 in monthly revenue
Check Your Business Credit Reports
There are three major business credit bureaus (Dun & Bradstreet, Equifax and Experian). Each bureau’s credit reports contain different types of information about a business, and serve different needs for their clients that may look at your business credit profile.
Check your credit report with each bureau at least once a year and verify:
- Your business’s contact information
- Trade relationships and lines of credit accounts and activity on it
- The industry in which the report formally categorizes your business (via its assigned SIC code).
Your business credit history can play a role in your funding options, but know that not all lenders judge your performance, or your potential on your credit history.
At Lendr, we know your business is more than a score. That’s why we offer flexible terms and funding options that are designed to work for your unique business needs, throughout your business life cycle, and whatever future opportunities are to come. Contact us to schedule a meeting with our experts!