The Guide to a Better Business Credit Profile

With a high business credit score, your business’s credit capacity can shoot through the roof. Why a personal credit score and business credit score do share some similarities, the SBA reports that businesses can have up to 100 times more credit capacity compared to personal credit capacity.

 

In addition to a having more credit capacity than what might have been possible with personal credit, you’ll also be able to protect your personal credit rating while increasing the overall value of your company in the process. The following steps can be very useful for getting your business credit profile polished relatively quickly and easily.

 

Don’t mix businesses expenses with personal expenses

The first and most important thing to understand about building a better business credit profile is the danger of mixing personal expenses with business expenses. It might be very easy and tempting to mix personal and business spending very early on in the process, but for the sake of your credit profile, you must make a point to keep them mutually exclusive as soon as possible.

 

Get incorporated

Even if you’re already incorporated, the importance of this step can’t be overstated. One of the main reasons that so many business owners interchange their personal and business expenses is the fact that they are legally one in the same with their business; you can avoid these muddy waters entirely by incorporating (or forming an LLC) so that your credit history as the business owner is legally separate from the business itself.

 

Acquire an EIN

Your federal tax identification number could be accurately described as a social security number applied to your business, and you’ll need it for tax filings. In order to open a business bank account in the name of the LLC or corporation, you’ll need to have the EIN handy.

 

Get a business phone number and open your business credit files

VoIPs, landlines, and cell phone numbers can all suffice as business phone numbers; just make sure that they’re separate from your personal phone number and registered in your business’s legal name. You will also want to open a business credit file with all three of reporting agencies: TransUnion, Equifax, and Experian.

 

Acquire business credit cards

After you’ve incorporated, opened your business bank account, established a business phone number, and acquired your EIN with credit files, your business’s credit profile should be sufficient enough to qualify for a business credit card. Make sure that the business credit card isn’t directly linked to you or any of the co-owners. The credit card should be attributed to a company that directly reports the credit card reporting agencies that you opened your business credit files with.

 

Foster relationships with multiple lenders

At any moment in time, the banks could change their lending policies and cut back your total credit limit with their particular institution. To avoid suddenly getting put into a difficult position by any one business’s reformed lending policies, it is wise to diversify the sources of your business loans.

 

Explore alternatives or supplements to direct business loans

Your options don’t end with loans from traditional financial institutions. You can pursue funding just as effectively by seeking out investors who believe in your product/service and are willing to help increase its credibility. Rather than focusing entirely on lenders that assess your credit worthiness, you can also consider asset-based loans.

 

Always pay on time

Among other things, business’s overall credit score is heavily based on trade expenses, credit utilization, outstanding balances and payment habits. To ensure that your business credit profile doesn’t slip into the red, always make a point to pay your creditors in a timely manner. Frequent, punctual payments will go a long way towards building up a credit profile that makes your business trustworthy enough to lend to in the future.

 

Conclusion

A strong business credit profile could very well be considered the very lifeline of the business itself. Everything from expenditures to staffing can be made by establishing a strong business profile, and just by taking some easy steps that many other enthusiastic business owners overlook in their haste, you can have a serious leg up in stability & growing power over the less savvy competition.