Over 50% of the small business owners that apply for business financing are denied. Usually, denial happens because of business and personal credit score problems. For a startup, this is particularly damaging. According to Crediful, you need to start improving business credit as fast as possible because you never know when you need access to financing.
Fortunately, you can improve business credit fast right now by using some of the methods presented in the paragraphs below.
Officially Establish The Business
This is absolutely mandatory. Your business needs to be established as a legit separate legal entity. You have to incorporate it or set it up as LLC. Then, you have to get your official identification number. Basically, you have to be sure that the company is operating legally before you can even think about improving your business credit.
Open A Bank Account For The Business
The bank account is mandatory because it separates business and personal financials. The new business account has to be used to take care of absolutely all the business expenses. This includes paying yourself with deposits to the personal account. When you apply for a financing option, a lender will want to look at the business account and its associated bank data to decide if you should be offered a loan or not.
Check Your Credit Files
Equifax, Experian, and Dun & Bradstreet are the major credit bureaus for businesses. The lenders often use data from Equifax and Experian when they make a decision. In order to build the profile, you do not have to register with a manual procedure. This is automatically done by getting information from available public records, together with information that is sent in by lenders and business creditors. The process is very similar to how personal credit profiles are improved.
The reason why you want to check the credit reports is that they include information about different things related to your business. You can easily see if there are some filings that are false or if errors exist. As soon as an error is noticed, you need to file a dispute. This is because it will help you to improve the business credit score by having accurate data present.
Obtain A Credit Line From Suppliers And/Or Vendors
Such relationships might already exist but if not, you want to set them up as soon as possible. Consider companies that you conduct business with every single day or week, like Office Depot, Staples, Home Depot or FedEx. Discuss the deals of a credit account with them. Most of these businesses will be happy to accommodate you so they keep you as a loyal customer. Just make sure that your payment history is always sent to the appropriate business credit bureaus. This is voluntarily reported. Ideally, you need to establish around 5 of these accounts in order to fill in the business credit profile and improve it.
Get A Good Business Credit Card
When using personal credit cards to pay for business-related expenses, you make a huge mistake. You need to stop and you have to get a business credit card. This one is not tied to your personal accounts and you can get many interesting benefits, like cash back and travel points. All this money can be reinvested into the business and when you properly use the business credit cards, it is so easy to increase business credit score.
Always Pay Bills On Time
In fact, you should preferably pay bills early. This is because the business credit score will be affected even if you are just a single day late. As you pay bills ahead of their due date, you do not forget about them and you can increase credit scores fast.