If you are a small business owner who is looking to expand, getting credit can be a challenging task regardless of whether you have a good corporate credit profile or not. There are a number of factors that lenders take into consideration when scrutinizing loan applications and normally, a good corporate credit profile can mean the difference between obtaining the loan your need or not.
Here are some important ways to build corporate credit and boost your chances of getting credit in the future:
1. Maintain Accurate Information
Maintaining accurate information and records can help you avoid different types of fraud. Also, accurate information facilitates communication in case a credit firm needs to contact a company about a fraudulent activity.
2. Get a Standard Business Loan
Another easy way to build corporate credit is to get a standard business loan, offered by a bank. Similar to a short-term personal loan, this is simply a loan that you are supposed to pay back within a given period of time - with interest. Usually, personal loans are used for virtually anything, from buying equipment to purchasing a home. Before making your loan application, it is important to ensure that the bank will report the activity to the business credit reporting agencies.
3. Organize Your Books/Records
If you are a sole proprietor, you need to form a limited liability company or a corporation in order to enjoy a reasonable level of liability protection. It is also important to keep all your books and records to legitimize your company and show to the lenders that you are operating a financially sound business with all the records properly kept and maintained. When you apply for loans, lenders consider each aspect of your business and therefore, you need to make sure that your business records are in proper order as proof of a reasonable and operating business.
4. Do Business with Suppliers Who Report To Various Credit Bureaus
Doing business with companies who will report to various business credit agencies will work in your favor when the times to obtain credit comes. If you are a successful business owner, paying them on time each month will help improve your score. If possible, you may want to register with them since the lenders often check with them before giving loans. In addition, you need to review your business credit report each year to determine how well your business is doing.
5. Practice Financial Responsibility
Paying bills in a timely manner is a sign that you are creditworthy while making late payments will have a negative impact on your credit rating. The manner in which you handle cash flow in your business also shows your company’s creditworthiness. Once you apply for credit, it is important to ensure that it is used for revenue generating activities only, instead of buying unnecessary items.
6. Seek Credit Long Before You Need It
If you are just a small company that is seeking to expand, you will need a minimum of two years to establish credit before any financial lender approves your loan application. More often than not, you should start building your business credit profile as soon as you set up your business. To build corporate credit at first, get a store-based credit line or a secured business credit card.
7. Corporate Credit Builder
Choose agencies that offer corporate credit building plans that enable small businesses to establish their credit profile. A corporate credit builder enables businesses to build vendor or trade credit and establish their credit profile. These plans offer assistance to businesses that need to boost their credit rating.
If you have a low credit score that is hindering your company from accessing loans and other credit facilities, then be sure to follow the aforementioned steps to take your business to the next level. Build your corporate credit so that your company can have access to various credit facilities as required.