Building a Strong Business Credit Score

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Why does it matter for your business to get a good credit score? Much like your personal credit score, a business credit score will determine your business’ eligibility for a loan. You will access low-interest rates, lease, and more vendors and suppliers. Credit bureaus will evaluate your credit score (usually a value that ranges from 1 to 100) based on how well you handle your finances and transactions. If you’ve ever been denied a small business loan or other financing options, you probably have a bad credit score.

This is primarily why there are high-risk credit card processing companies. These are the companies that take on risky transactions with the promise of a lucrative return. Businesses considered high risk are those with poor credit history, multi-currency companies, and companies that have little to no credit card processing history. If you don’t want to be considered a high-risk business, you have to take care of your credit history and score.

Register Your Business Entity

The first thing you need to do is create separate accounts for your personal and business credit score. You can set up your business as either a general partnership or sole proprietorship. Still, this set up does not allow for the legal separation of your personal and business finances. If you want to protect your investments, set your business up as a C-corporation, S-corporation, limited liability company, or limited liability partnership.

Check Your Credit Score Regularly

Make it a habit to check your business credit score regularly. The same goes for your credit score. You have to pay a fee to get a copy of your credit report. Checking and monitoring your credit score will allow you to repute any possible erroneous entries there. You could be suffering from a low business credit score when because of a wrong entry.

Apply for a Business Credit Card

Credit bureaus will collect information about your payments to vendors and suppliers. A business credit card is a good place to start because these credit card companies will report the transactions you made to the credit bureaus. These credit cards even have features and reward programs that will help business owners.

credit card

Set Up Trade Lines With Suppliers

Trade credit is when suppliers, from which you buy supplies and ingredients, allow you to pay for the inventory several days after it has been delivered. Ask the supplier to report the payments you make to them to a credit bureau. You need at least three trade lines before credit bureaus take these into account. You can also set up a trade line with smaller vendors such as your water supplier or office supplies distributor. You can also list the vendors as trade references on your account.

Make Payments on Time

As with your personal credit score, make sure to pay your dues on time. That will ensure that you get a good rating from the credit bureaus. It will signal your capacity to pay the creditors. You get more points if your pay earlier than the due date. Remember also not to max out your credit card. Keep your spending in the 20% to 30% range of the credit limit.

Opportunities in business open more for those with sound business practices. Not only are credit bureaus going to trust you more, but you’ll also have the chance to grow and expand your business. The doors of credit institutions often close against companies with bad credit standing.

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