Improve Your Business Credit With These Easy Steps
Having a strong business credit score can open the doors to long-term financing, unsecured lines of credit, mezzanine lending, equipment leasing, and much more. Unfortunately, no one ever explains to entrepreneurs how to improve their business credit rating, leaving many to fall into traps, or do things they think are right, only to find their credit rating has not changed at all. We have compiled a list of some of the best things you can do to improve your business credit and avoid pitfalls in the process.
First Things First: Do You Have a Business Credit Card?
The second you register your business and get a Tax ID, you should apply for business credit cards. For many emerging entrepreneurs without much of an established financial history for their companies, this could restrict access to secured lines of credit. Instead of holding out for unsecured lines of credit, use the secured credit card for minor purchases, and in a few months, reach out to the credit card company to see if you qualify for an “official” business credit card.
Second: Shop Around for Vendors
Every business owner knows that paying bills on or ahead of time will improve their credit ratings. However, not all vendors and suppliers are created equal. Many do not report their information to credit agencies. Businesses can use those vendors, pay their bills, and still not see their business credit rating move an inch. Talk with your vendors and suppliers to find out if they report their information. If they do, your business credit rating should improve in short order. If they don’t, then it may be time to shop around for new vendors.
Third: Look Into Consumer Financing
Businesses are also consumers – whether is it industrial machinery, specialized equipment, computers, or office furniture. Many places specializing in putting together large orders for businesses offer consumer financing. This extends a line of credit to consumers so that the upfront cost is spread across manageable monthly payments. This not only can ease the strain on cash flow when making large payments, but by taking advantage of this financing from vendors (and making the payments on time) it will improve the business credit rating.
Lastly: Use Those Lines of Business Credit
New business owners can be very thrifty when it comes to expenses. If the money is not readily available, then they will usually forego purchases. This is not a bad philosophy, overall, but when it comes to lines of credit, not using them can stagnate business credit growth. Using business credit – even if it is for the occasional ink cartridge or package of coffee filters – can still count toward increasing your company’s credit rating. By spending a little and then paying it off immediately, your business will show good spending habits and that credit rating will go up in no time.