How to Build Your Business Credit Rating
Having a good business credit rating is a golden key that can help open the doors of financing- whether from the bank, vendors and suppliers, or potential investors. And with the current economic environment making it harder for small businesses to get the financing they need, this key is all the more vital to the success of a business.
Here are a few tips to help build up and maintain your business’ credit profile:
Tip #1: Separate your business credit profile from your personal credit. Many business owners are unaware of this option, especially if they are running a sole proprietorship, and they finance their businesses with their own credit and assets. This can be a costly mistake, since your personal credit profile will then directly effect your business credit, and visa versa.
Tip #2: Register your business with the major credit reporting agencies and monitor reporting. Banks, credit card companies, utility, and phone companies, as well as numerous other businesses will report billing and credit information regarding your business to the major credit reporting agencies: D&B, Experian, Equifax and TransUnion. With this information, the credit reporting agencies produce reports and credit scores. Keep in mind that any information on your business’ financial status, as well as any court cases and bankruptcies will also make their to these reports. Thus, it is important to monitor these reports regularly.
Tip #3: Make good cash flow management a priority. Make it a priority to pay your bills on time. Simple idea, right? It just may not be so simple to implement- especially if business has not been so great lately. In a previous article I included a few doable tips to improving your small business’ cash flow.
Tip #4: Seek out transactions that will improve your credit score. As I mentioned above, whether you realize it or not, chances are that your business is already generating data that can be accessed by a third party to determine your business’ credit-worthiness or financial stability. You might as well specifically seek out those arrangements that will build your business’ credit profile. You can find out which businesses report to the credit agencies and make it a point to do business with them and to keep your payments on time. The credit reporting agencies themselves also offer a number or credit-building services for a fee.
Many business owners are unaware of this option, especially if they are running a sole proprietorship, and they finance their businesses with their own credit and assets. This can be a costly mistake.
Follow these…
Interest-free credit: with cash-flow of businesses being subject to payments from clients, cash-flow can sometime be tight.
Separation of expenses: sometimes it is difficult for you separate your personal expenses from your business expenses – just ask yourself how many times you’ve had to pay for a business dinner on your personal credit card if you need evidence of that. With business credit cards this task becomes much easier.