You’ve already hear that an effective way of boosting your business’s financial future is establishing and improving your business credit.
But you’re probably asking questions like “what’s a good credit score? “
Business credit is a record of the financial responsibility of the business that is used to gauge how likely a business will repay a loan.
Lenders hence often consider business credit as one of the major determining factors when making decisions on whether to approve business loans or in setting interest rates.
With a good credit score, you have a higher probability of qualifying for critical business funding that you need.
Here is a look at the simplest ways to build and improve your business credit.
Pay the Business Invoices on Time
Late payment of invoices has a significant effect on your business credit.
It negatively affect your record, particularly if the creditor opts to report you.
So, always make a habit of clearing the invoices for your lenders, suppliers, and creditors on time without fail to build your business credit.
A timely payment will reflect positively on your business, and better yet, it will improve your relationships with your creditors.
Separate your Business Credit History from your Personal Credit History
To avoid the impact of personal credit history to the business credit history, it is highly advisable to keep them separate.
For instance, if you are personally going through financial hardships, it should not affect your business credit report.
Moreover, having separate personal and business bank accounts shields you from being personally responsible in case your company gets into monetary trouble.
Separating your personal money from your business money is not only crucial in improving your business credit scores but will also help your business to be taken serious by investors, creditors, and suppliers.
Avoid Using Too Much Credit
If you are yet to get a business loan, you are likely to be thinking about how to get a small business loan.
However, after your business is well established and it no longer depends on borrowing to operate, its recommendable to invest the profits back to the business instead of taking loans on credit.
More so, not using all the credit given to you by creditors is a perfect way of improving and building your business credit.
This is referred to as a credit utilization ratio in which the less the credit you use out of the total credit awarded to you, the higher your business credit score.
Utilizing lesser credit illustrates that your business is financially stable and does not contingent on credit for it to run. By being maxed out on credit, your business is seen as cash-strapped.
Get Small Business Loans
Receiving small business loans frequently is a perfect way of improving your business credit.
However, you obviously need to make your loan payments on time s as to have a positive impact on your credit score.
The small business loan lender should also be reporting your payments to a credit reporting agency.
Borrowing and repaying these loans on time will gradually build your business credit score.
Borrow from Lenders That Report to Credit Bureaus
Another simple way to improve your business credit is by working with lenders that report to business credit bureaus.
Before you apply for a loan, confirm that the lender will report your payment history to credit agencies.
However, do not borrow more than you can comfortably pay off to avoid defaulting loans and destroying your business credit score.
Responsible borrowing and timely payments will effectively improve your business credit score.
Conclusion
Accessing affordable loans and funding is essential for the success of any business.
However, a bad business credit history can halt your business success.
We hope that actualizing the guidelines mentioned above will be effective in improving your business credit.