How Can a Company Build Business Credit?
It is common for a new business owner to focus on establishing a business credit history. The following are some tips to help build business credit, even for those individuals whose personal finances are not the best:
1. Register an EIN
If a small business owner does not yet have an Employer Identification Number (EIN), they should establish one. An EIN number can offer a different way to apply for business credit lines.
It is also possible to open a business and savings account using an EIN. Beyond registering an EUN, it is a good idea to have a physical address and separate phone line to lend a business legitimacy.
It is also wise to open a business bank account that is only used for business expenses. Combining business and personal expenses can make accounting difficult.
2. Sign Up with Dun & Bradstreet
Dun & Bradstreet is a credit reporting agency that offers reports on businesses, as well as information on business credit. It is possible to apply for a nine-digit D-U-N-S number for free. This will enable a company to start building business credit immediately.
3. Use a Business Credit Card
A business credit card allows a company to establish a business credit history. It is important, however, to pay off credit card bills on time or even early. This way, the credit card company may report good behavior to the credit bureaus, thereby maintaining a high credit score.
To get approved for a business credit card, a business owner may need to undergo a personal credit check and have a personal guarantee. If a business owner does not qualify for a traditional business credit card, he or she may apply for a secured or retail card at a store the business regularly uses.
4. Apply for a Working Capital Loan
If a business owner does not have the best personal credit score, then he or she may want to apply for a working capital loan. This type of loan can help an owner finance his or her day-to-day operations and cover short-term financial requirements.
Making timely payments can help increase a business’ credit score.
5. Check Business Credit Reports Regularly
It is wise to closely monitor business credit reports to ensure that the business is in good financial standing. It is also possible that a business owner may catch errors when reviewing statements, and a simple mistake can seriously damage one’s score. In this way, regular monitoring can save a lot of hassle.
A poor business credit score can make it hard for a business to get additional funding. In fact, it can make lenders not want to work with a business, because they are not sure if they will be paid back. It is therefore important that a business owner constantly try to improve a poor credit score.