How to Build Business Credit

What is Business Credit?

Does My Business Have a Credit Score?

Why Build Business Credit?

Separating Personal and Business Credit

How to Establish Business Credit

How to Improve Business Credit

Monitor Your Business Credit Score

Conclusion

What is Business Credit?

Business credit is extended to businesses rather than individuals. It can include lines of credit, loans, and other forms of financing. You could use business credit to finance expansion, purchase inventory, or cover operating expenses.

One of the main benefits of business credit is that it can help businesses manage cash flow. Businesses can often access capital before using it, which can help them avoid taking on debt at high-interest rates. Additionally, business credit can help businesses build a good credit history, making it easier to obtain financing in the future.

Building business credit is vital for any small business owner. It is an excellent way to get financing and show responsibility to creditors.

As a small business owner, you should take steps to improve your business credit score where you can.

Does My Business Have a Credit Score?

If you've taken out a loan, entered into another line of credit, or got a credit card through your business - you will have a credit score. A "good" score is typically in the top 20%. You can check your credit score on a website such as Experian or Equifax.
If your business is newly established, read on to find out how to build your business credit.

Why Build Business Credit?

There are a few key reasons to focus on building business credit, even if you have good personal credit.

Easier to access financing

One of the main benefits of building good business credit is that it will be easier to get loans and other forms of financing in the future. Lenders will be more likely to approve your loan if you have a good business credit score.

Lower interest rates

Another benefit of having good business credit is that you'll qualify for lower interest rates on loans. Lower interest would save you a significant amount of money.

Improved terms

You may also get improved loan terms, such as more extended repayment periods if you have good business credit. Having longer to repay makes it easier to manage your cash flow and repay your debts.

Greater flexibility

Good business credit can also give you more flexibility when choosing lenders. You'll have a broader range of lenders to choose from and may be able to get better terms.

Maintaining good business credit will give you more options, and better terms, when applying for finance.

Improved supplier relations

Good business credit can also help you improve your relationships with suppliers. Suppliers are more likely to extend credit to you if you have a good business credit score, helping you save on inventory costs.

Building good business credit might take time and effort, but it's worth it in the long run. Healthy business credit can save you money and make it easier to get the financing you need to grow your business.

Separating Personal and Business Credit

Your personal and business credit scores are two significant numbers. They both affect your ability to borrow money and get favourable interest rates. In order to maintain them both, you need to understand the difference between them.

Any credit score is based on your payment history, credit utilisation and borrowing habits.

Both personal and business credit scores represent your creditworthiness to potential lenders. They are each based on your credit history, which includes information such as repayment habits, how much debt you have, and credit you have used in the past - on behalf of yourself or your business, respectively.

As a small business owner, you shouldn't use your personal credit score when applying for credit. This can lead to higher interest rates and decreased borrowing power. So, keeping your personal and business credit scores separate is important. Keeping your business credit healthy will work better for you in the future. However, making business purchases on a personal credit card will not have any positive results for the business.

Your personal and business credit should be kept separate.

How to keep personal and business credit separate:

1. Get a business credit card in your company's name

2. Use your business EIN (Employer Identification Number) when applying for loans or lines of credit

3. Pay your business debts on time and in full

4. Keep personal and business expenses separate

5. Monitor your business credit report regularly

Following these simple tips ensures that your personal and business credit scores stay healthy and separate. When you need to borrow money for your business, these tips provide you receive favourable terms. 

How to Establish Business Credit

Establishing business credit can be challenging if you have no previous experience. Still, it's essential if you want your business to succeed.

Get a business credit card

Use the card for all your business expenses and pay the balance in full each month.

Apply for a small business loan

This will help you build up your business credit history and show lenders that you're serious about repaying your debts.

Use invoicing services

Several companies will help you create and send invoices to your customers. This is a great way to track expenses and ensure customers pay on time.

How to Improve Business Credit

Pay your bills on time

Pay all your bills on time, including utility, credit card, and loan payments. This shows that you are responsible with money, and creditors will be more likely to lend to you in the future. Try to keep your balances low to show that you are not overextended and can manage your finances well.

Late payments damage your credit score and make it harder to get loans in the future.

Paying your bills on time is one of the most important factors when it comes to improving and maintaining good credit. 

Keep accurate records

Make sure you keep accurate records of all of your income and expenses. This will help you keep track of your finances and show lenders that you're serious about repaying your debts.

Try to get positive reviews from customers

Customer reviews can have a significant impact on your business credit score. If you can get positive reviews from customers, it will show lenders that you're providing a good product or service.

Following these tips can help you improve your business credit score and make it easier to get loans and other forms of financing in the future. Ensure you keep this up over time to maintain a good credit score and stay favourable in the lender's eyes.

Monitor Your Business Credit Score

Keep an eye on your business credit reports to catch any errors or negative information that could hurt your financing chances. You can use a business credit monitoring service to keep track of your score and get alerts if there are any changes.

You should check your business credit reports frequently to ensure no errors or negative information. You can get free copies of your business credit reports from business credit bureaus.

You can dispute any errors with the credit bureau. It can take a few weeks, but it's crucial to ensure that your report is accurate before applying for loans or other forms of financing.

You should monitor your credit score, so you are aware if there are any changes. 

Conclusion

Building good business credit is necessary if you want to get loans or other forms of financing in the future. You can build good business credit by paying your bills on time, keeping accurate records, and monitoring your credit reports. You should also try to get positive reviews from customers. Monitoring your business credit score over time is also important to catch any changes or negative information that could damage your chances of future funding.

Apply Now

If you're operating a small business and need funding or to build your credit - apply for a business loan with Love Finance today. Our expert account managers are on hand to offer helpful business advice, and could even get your business funded in as little as 4 hours!