Having a good business credit history is important if you want to establish your credibility with lenders. There are a few things you can do to build a credit history for your business. These include opening new business accounts, and keeping track of your score. These steps will help you build your business credit and secure the financing you need.
For lenders to trust you, it's crucial to establish business credit
The first step in building your business's credit is establishing a business checking account. It should be opened at a bank the same as your personal account. Having a business checking account can make it easier to get approved for loans and improve your access to capital. You should also obtain a copy the business credit report and be able to read it. You should keep an eye on your business credit score, and update it regularly.
Information about your company's registration status will be included in your credit report. Most businesses are registered with their state government. You'll need to register in your state if your business is unincorporated or foreign. You should also obtain any required professional or business licenses. Many commercial credit agencies also use public information to determine your business's creditworthiness.
For business credit, opening new accounts
For small businesses, many lenders offer trade credit lines that allow them to purchase equipment or make improvements. These lines of credit are usually subject to high interest rates. Therefore, it is important you have several accounts to help build your business credit. These updates may take several months to reflect on your credit reports.
A legal entity is necessary for your business. It can be a sole proprietorship (or a corporation), a partnership (or limited liability company). A business phone number is also important to give legitimacy to your company and the government. After you have a business phone number, you can start opening business accounts.
You should also open a bank account for your business. These accounts are sometimes called "Net 30" and allow you to pay later and buy goods on credit. Common tradeline purchases include electronics, office supplies, and marketing materials. You should request the vendor to inform which credit bureaus they have reported to before signing up for a new tradeline. These tradelines won't help build credit for your business.
Monitor your credit score for business
Your company should know its credit score. It is not only a way to avoid identity theft, but it can also help you identify unauthorized accounts. It can also be a great way to visualize the financial health of your business. It can even help you obtain trade credit and financing you might not be otherwise able to.
Your business credit score is based on several factors, the most important of which is your payment history. However, despite this, some lenders base their decisions solely on one number. Signing up for credit monitoring is a great idea to keep track and monitor your credit score. Bullseye Finance Group offers a package which includes five types reports at a very affordable price. Their packages also include risk and failure scores and key performance indicators (KPIs).
Different agencies use different scoring scales. Paydex calculates your credit score based on the amount of payments you have made and any trade references that you have received from vendors. Your business will be considered lower-risk and offered better payment terms if it has a high score.