Much like personal credit, a business has its own credit rating. Financial experts advise that within the first year of launching, entrepreneurs should do whatever they can to improve their business credit. Luckily, there are a few simple tricks to improve ratings that any entrepreneur can do.
1. Open a business credit card account
Dipping into personal finances for your business is a great way to simultaneously bring down your personal credit score while preventing your business credit rating from growing. By getting a credit card account for your business, even small purchases for office supplies can help your company build a positive credit history.
2. Pay on time or ahead of schedule
Business credit bureaus track how timely companies are at paying their bills. Even if a bill has a 90 day window, making a payment within the first 20 days can tremendously boot your business credit rating.
3. Get lines of credit with your vendors
Many companies have vendors and suppliers that they do business with regularly. By asking for a line of trade credit, they can extend your payment window on invoices. It should be noted that companies need to have at least four lines of business credit open before a credit score can even be created, so getting lines of business credit with your vendors is a great starting point.
4. Regularly review your business credit reports
The business credit industry is a very large entity. With more more business credit reports being generated every month, there are also more business credit report errors. Errors can (obviously) hurt your business credit rating, but no one needs those negative numbers – especially if they don’t belong there! Banks and credit bureaus advise entrepreneur to review their business credit reports regularly and to get any negative marks removed.
5. Establish Your Business
As mentioned above, it pays to keep your personal and business expenses as separate as possible. But establishing your business – getting a phone number listed in a directory, obtaining a federal tax number for your company, or opening a bank account in your company’s name – is a great first step in establishing business credit. After all, your business credit cannot grow if it isn’t a separate entity.
6. Increase you personal credit score
When entrepreneurs are first launching their companies, it can be very difficult to get financing from banks, because a business credit rating has yet to be established. In order to get that initial capital, many banks will look at an entrepreneur’s personal credit score. As time progresses, your company will establish its own business credit line, which can then be used to get loans and other forms of financing.