How to improve your business credit score
At some point in your journey as a beginner in business, The thought of getting funds to grow your business must have encroached on you once or more. Although you were able to start your business with your savings, a time will surely come when you may need additional funds. However, realizing how small business funding works, companies that will help build business credit, and how to improve your business credit score will greatly be of help to you and will guide you on your way to achieving success as you expand your business.
What is business credit?
Business Credit is the overview of a business’s financial history, which reveals its eligibility for loans and other forms of financing. Having access to business credit is the backup for a business. It enables you to obtain the capital you need to grow, cover day-to-day expenditures, purchase stock, employ more staff, and enables you to retain the money on hand to cover your expenses of doing business.
In simple terms, Business credit is the business’s ability to buy something now and pay in the future. It’s also a vital tool for creating relationships with dealers and business-to-business sellers. Business credit can serve as an effective negotiation device when you engage in a cost and service discussion with other enterprises. Generally, it’s the main indicator of how strong and reliable your company is business-wise. In the absence of business credit, your business will strive to access loans, solidify relationships with vendors, apply for credit cards and flourish as a small business.
Also, The better your business credit, the more financial opportunities your company will obtain. Firstly, lenders are more likely to offer you a loan even at a lower interest rate than when your company has a bad credit record. Furthermore, with the accessibility to loans, your company can borrow capital to invest or get new stocks which it may probably not be able to pay for out of its own pockets.
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Companies That Help Build Business Credit
As long as you are set for creating or expanding your business’s credit profile, you will need a business account that is reported to one business credit bureau. This, however, implies that finding lenders who can handle the report is a must step.
Below are various companies that can help build your Business Credit.
- Experian
Experian is a credit reporting agency that is committed to helping you protect and improve your credit as well as storing your credit information from different reporting authorities, such as lenders, into a credit report. You can start by trying out their service for free on their website.
- Uline
Uline is a privately owned dominating distributor of shipment, packaging, and factory-made supplies.
They offer a wide variety of products your business may need including office furniture and supplies, shipping boxes, warehouse equipment, safety products, food services packaging and kitchen supplies, and more.
However, you will need to submit a net-30 application or you can submit a catalog request on their website to be eligible for a line of credit with Uline.
- Grainger
Grainger is a big, international industrial supply company that offers net 30 accounts to buyers. You can purchase Grainger’s products online or at its retail store.
- Quil
This is a great option for building business credit. Quil sells varieties of workwear, supplies, and materials. The company will scan through your application and approve it only if you are eligible. If approved, ensure to set a credit limit for your account.
- Crown Office Supplies
Crown Office supplies is an online shop that has a small range of products, but it can be partially simple to obtain a net-30 account. To be qualified, your business must be at least 90 days old and without negative marks in your credit history.
- Compuscan
Compuscan is among the African leading credit bureau that is focused on providing credit history reports in South Africa and other African countries.
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How To Build Business Credit With Bad Personal Credit
While it is common for a new entrepreneur to focus on establishing a business credit history, Here are some guides to help build business credit even with bad personal credit.
- Set Up Tradelines
A lot of information can spin up on your business credit account reports but tradelines cannot be overemphasized. Business trade lines are lines of credit created between a business and a vendor, the same way as an account with an office supply company where the company allows the business to pay the account balance days or weeks after receiving the stock.
You could keep a business credit report without any trade lines, but it may be difficult to build business credit in default of any. This is due to your number of trade lines and expenditure history not being factored in your business credit file.
However, there is every possibility that you are not building your business credit even if you always pay on time because not every vendor will document your payment activity.
Nevertheless, be mindful about opening an account with a yearly fee. Also, consider opening a term account with vendors who will report your activity to one bureau. Go ahead and enquire where your payment will be reported to from your vendor before opening an account.
- Always make early payment
Payment history is the most important basic factor in building business credit. paying your bills on time shows that you can keep up with your debts.
Therefore, it is required of a business owner to always pay personal bills on time because once a payment is missed, it can affect the credit score negatively, and this can be hard when building back up.
- Merge And Establish Your Business
Merging your business gives you special legal liability protection and enables you to insure your intellectual property.
First, ensure that your business entity is separated from your identity. Obtain an Employee Identification Number (EIN). Hence, Having an Employee Identification Number indicates that you have a preferred option for applying for credit
Secondly, open a checking and savings account for your business. Also, ensure that you make use of your legal business name for any business bank account you want to open.
Thirdly, attach a phone line strictly for your business and also make sure that it’s recorded using your legal business name.
Lastly, register with Dun & Bradstreet to receive a free D-U-N-S number. Dun & Bradstreet is one of the leading business credit reporting Bureaus. They offer a nine-digit number which is used to verify the physical area of your business.
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- Review Your Business Credit Report For Errors
Always scan through your business credit reports to ensure the information in the reports is without errors that may affect your credit rating negatively. If there are any, contact the bureaus individually to report and correct errors.
- Create A Secured Credit Card
Creating a secured business card is another easy way of building credit even with bad personal credit. However, you may not qualify for a regular business card due to a bad personal score but with a secured credit card, you can deposit in advance to reserve the credit line. Likewise, when you pay off the balance monthly, it boosts your point score, the same way as a normal credit card.
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Conclusion on How to improve your business credit score
The time to start building your business credit is now, so it will be established by the time you will need it. Even though the idea of taking up a loan isn’t there yet, always remember that business is unforeseeable sometimes. You never know when you will start reaping from a huge business credit score.
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