Building Business Credit

 A business credit score is similar to a personal credit score, such as a FICO score, but is based on a company’s creditworthiness instead of an individual’s creditworthiness. Business credit scores are built by loans, lines of credit and credit cards that are taken in a business’s name and do not have personal liability attached to them. Similar to personal credit, a strong business score can lead to lower insurance premiums, lower interest rates and can help your business be approved for a loan, lease or line of credit.[1] According to the National Small Business Association, 20 percent of small business loans are denied due to business credit. [2]

Building credit history for your business is similar to building your personal credit history. It takes time, and a bit of financial savviness, but with the following tips you’ll be well on your way:

  1. Check your credit score. Before you can start building your credit score, you need to know what your current score is. If you don’t know if your business has a credit score, there are several ways to check. Dun & Bradstreet, Equifax and Experian are three major business credit bureaus. Checking your business credit score does not put a ding on your credit.
     
  2.  Open a bank account and credit card for your business. It is important to keep your business finances separate from your personal banking. Opening a business checking account in your legal business’s name keeps your money separate and is one of the first steps to building business credit.[3]

    Don’t bite off more than you can chew with a business credit card; keep your balances low and always make payments on time. Only charge the card for what you know you can pay back; the goal is to establish a consistent credit history.

    Business credit cards can also come with more rewards and administrative functionality than personal credit cards. Business credit cards can provide a flexible way to manage your business’s cash flow while also building credit.
     
  3. Paying vendors. Make sure to pay your vendors on time. Building business credit is about proving that you are a reliable borrower, and having an established history with vendors shows this. Encourage your vendors to report your payment history to business credit bureaus; the more positive payment history reported, the better your business credit score will be.[4]

Building a solid business credit score doesn’t happen overnight, but with a little patience and time, you can set your business up for success. A good business credit score can open the door to starting, supporting and growing your business.

[1] https://www.creditkarma.com/advice/i/build-manage-small-business-credit/

[2] https://www.sba.gov/blogs/10-stats-explain-why-business-credit-important-small-business

[3] https://thenextweb.com/entrepreneur/2012/07/13/no-credit-big-problem-here-are-7-steps-to-build-your-startups-business-credit/

[4] https://www.creditkarma.com/advice/i/build-manage-small-business-credit/