A business credit score is basically what shows the creditworthiness of a business. It lets banks and lenders know if a company is a decent applicant to give or provide a credit line to, depending on its past credit history.
Similar to personal credit score, business credit measures a company’s monetary responsibility and whether financial institutions and other business organizations can trust the company in question with financial loans or other credit facilities.
If you are unsure how you can improve our business credit score fast, this is the ultimate guide for building business credit.
Build business credit, brick by brick
Once you’ve incorporated your company or sought credit, then it’s most likely that you have a business credit score.
There are various agencies from where one can get information about their credit scores to know how they perform. These agencies will generally present you with comprehensive reports on the nature of your business’ credit. These reports are essential to be aware of the status of your business credit.
So, if you are new in business and are wondering about how to build your business credit score, here is how you do it:
- Limited liability companies often have better credit scores than businesses where the business’s liability is unlimited. Therefore, ensure that you incorporate your new business into an LLC (Limited Liability Company). LLCs have their economic entities independent of your personal financial status. This also means that you, as an individual, are protected from the financial liabilities of your business.
- You should also ensure that you acquire an Employer Identification Number from the relevant government bureau that regulates business activities. Once you have this, ensure that you apply it in all your business transactions.
- Choose a financial institution that best suits your needs according to your business requirements and open a company bank account with them, ensuring that you use the company’s details, and not your personal information, to open the account.
- It also helps a great deal to acquire a separate company address, telephone line, email, website, etc. You should ensure that your company is visible in the commercial world.
- Acquire a business credit card for use in your commercial transactions, as credit card transactions are way more likely to get approved than other financing options.
Now you have business credit, here’s how to maintain it
To keep a good business credit, the first thing you need to ensure is that you pay your company bills according to the relevant terms agreed. Missing your payments or increasing company debt will hurt your company’s credibility and damage your credit score.
Also, a subscription to an agency that will furnish you with reports on your business credit scores and transactions will go a long way in helping you monitor, maintain and devise strategies to improve your business credit.
Benefits of having a good business credit
The following are some of the benefits of having a good business credit score:
- Superior negotiating power
- Better credit limits
- Better chances for loan approvals and other credit facilities
- Access to unsecured loans
- Better car insurance premiums and rates from insurance companies
Successful businesses have a strong credit
Almost all vendors in the market will check up on your business credit reports before making the important step of deciding whether to give credit facilities to your company. It is therefore paramount that you ensure that your business maintains good credit.
This will ensure that the next time you plan to expand your company, funding will be easily available for this purpose.