It is always important to develop strategies to build your business credit. Your credit score is a major factor in determining whether or not your loan application will get approved. Your credit score is crucial if financing is essential to your business’s success. More than 70% entrepreneurs agree.
Your credit for business is very similar to your own personal credit. It takes into account things like the amount of money you borrow, your repayment history, and other financial obligations.
It’s no surprise that lenders look at your personal credit score when you apply for business financing. It’s logical to assume that if your personal track record is good, you will bring the same discipline and efficiency to your business.
When deciding whether or not to approve your loan, lenders will consider several factors:
* Credit personal : Includes payment history and amounts owed.
*Â Personal Debt Coverage: Indicates if you can personally pay back a loan if your company struggles.
*Â Personal Debt Usage: Calculates the amount of credit that you are using.
*Â Business Debt Coverage: Indicates the financial health of your business by evaluating your cash flow and your debt repayments.
*Â Business Debt Usage: Compares the debt of your business with its assets and revenues to determine if it is in line with other businesses.
*Â Business Revenue Trend: Examine revenue growth to determine the direction in which your business is heading.
Many of these factors are based on trends, as you may have noticed. Trends take time. It can be difficult for new businesses who have not had the chance to build a solid track record.
It’s important for both established and new business owners to develop a strategy for building their business credit. Here are six proven strategies:
1. Incorporate : By adding LLC or Inc., you are taking the first steps to establishing your business’s track record. After you have filed the paperwork, the business is legally separated from your own credit history. Your personal credit history will still be considered, but your business can now be seen as a separate entity.
2. Open a business credit account. You’ll be doing a lot for your business when you open a card. Your payments will be reported to the credit bureaus. This is a great way to build your credit. If you choose a rewards card, you can earn miles, cash or other incentives by making the same purchases you would have made anyway.
3. Pay promptly: Each time you pay and meet a financial commitment, you add another positive data point in your credit score. Over time, these points add up and give lenders a good reason to work with you. Paying your bills early can help you build credit faster than paying them on time.
4. Set up automatic payments. While small business owners plan to pay their bills regularly, it is easy to forget when life becomes hectic. Your score will be affected by late and missed payments. Sign up for automatic payment to eliminate the possibility of this happening.
5. Check for errors Never put your credit in strangers’ hands. According to study up to one fifth of people have inaccurate data in their credit reports which can lower their score. Monitor your credit reports and correct any errors you find.
6. Hire an expert. While you can use many strategies to improve your business’ credit rating, it is sometimes beneficial to hire a counselor. These experts use their special training to build you sustainable credit.
These strategies will help you to improve your credit, and increase the possibilities of financing in future. If you have had issues with your credit in the past, you still have options. There are a few financing products that can be accessed with bad credit.
1. ACH Loans
2. Business Lines of Credit
3. Cash Advances for Merchants
Remember that your business credit card is your calling-card for many functions. Each step you take to improve your credit score will pay off. You should be proactive. Your credit score will be calculated every day, whether you want it to or not. Take the time to speak up.
