Establishing business credit helps your business benefit in different ways. It helps your business gain essential opportunities related to supplier payment terms, financing for loans and lines of credit, and business insurance. Good business credit allows your business to obtain these opportunities at affordable rates. Some business owners may not understand the significance of establishing credit for their business, especially if they think it is tied to their personal credit. The following provides insight into what you should consider when establishing credit for your business, including steps to take to encourage business growth.
Why Establish Business Credit?
A business can have a credit report and a credit score. Lenders, suppliers, and businesses that want to do business with you may use your business credit report to learn about the credit worthiness of your business. The information is vital for securing favorable terms for business financing and helping you qualify for business loans. Information about your personal credit could be required by lenders, especially if the business loan requires a personal guarantee. If you're looking to apply for a business loan or take advantage of some of the best business credit card offers available to help cover your business expenses, these actions can help your business build credit.
What You Can Do to Start Building Business Credit
If your business has little or no credit, you still have options. Learn about business credit builder options, including those that report to business credit agencies. Lenders want to know your payment history, if you pay your bills on time, and learn the likelihood of how you'll make future payments with a new loan. Payments made to vendors, suppliers, and any financing or business loans are included in your business credit report. These accounts help your business grow.
A common way to establish credit for your business is to sign up for a credit card. Some of the best business credit card options have low interest rates and come with benefits and perks, including cash-back rewards. If you qualify, start with one card. Use it for business expenses and make your payments on time each month. Consider other business credit builder accounts when you feel you can handle opening another account for your business needs.
Monitor your progress by reviewing your business credit report. Check scores for all reports at least once a year. It may take a few months for accounts to appear. Your business credit report and score can be accessed without you being notified, so it is imperative to understand what can affect your business's credit history.
Additional Tips about Establishing Credit for Your Business
If your business is new, create a foundation that gives it a professional look for potential clients and lenders. Register your business, following the state protocols where you operate. Establish business contact information, including a phone number and email. This information becomes part of your business credit report. It may become part of your business profile if you obtain a commercial credit agency loan. Get a DUNS number for your business if you don't already have one. This is a number that identifies your business with Dun & Bradstreet, a business credit reporting agency.
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