How to Build and Improve Your Business Score
Jul 06, 2021
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Good credit is vital for all businesses. Having vast resources, especially financial, will significantly impact your business success. However, building business credit isn’t an easy thing to do. You’ll need to focus on some vital elements to succeed.
If you’re thinking of building your business credit, consider following the tips below to increase your chances of getting a business loan.
Select A Proper Business Structure
Every business is registered with a defined business structure. Business owners can opt for structures like a sole proprietorship or a Limited Liability Company (LLC). What‘s important is knowing that these structures work differently. For example, a sole proprietorship doesn’t have a legal or financial distinction from you as an individual owner.
On the other hand, an LLC allows you to separate your business's legal and financial liabilities from you as an individual entity. To build a good business credit, consider choosing this type of business structure. Then you can start building credit under your business name.
Apply for A Business Loan
Acquiring a business loan from lending companies, like CreditNinja.com, is an excellent way to build business credit. You’ll only have to show your business cash flow, income, age of business, and offer collateral to qualify for a business loan.
Although most lenders require that your business has a good credit score, some lenders are willing to provide a loan to start-up businesses yet to gain business credit.
Create and Maintain Good Credit Relationship
Having a good credit relationship with your suppliers and vendors starts with a good business credit. Such good credit relationships, especially with relevant industries, are invaluable in the business community. This underscores the importance of establishing and maintaining a fantastic credit relationship.
Some vendors and suppliers may report your payments to business credit reporting agencies. Prompt payments will reflect positively on your business credit history. Generally, suppliers and vendors aren’t required to report such activities. So it might be a good option to only transact with those that do.
If you’ve established a good relationship with your suppliers and vendors, you can even ask them to report your payments as an act of favor. You might be lucky enough to find some that will gladly do it for you.
Obtain A Federal Tax Identification Number
The next step in building a good business credit score is to get a federal tax identification number. The federal tax identification number or Employer Identification Number (EIN) acts as a social security number for your business.
To change your business entity, get into a business contract and open a business bank account. Your business must have the EIN, which is a necessary requirement for smooth business operations.
EIN is one of the important requirements that your state will require to register your business as a legal entity. Even if you aren’t planning on building business credit, a federal tax identification number remains indispensable.
Open A Bank Account
Now that you have an EIN, the next step in building a business financial identity is opening a business bank account. It’s best to opt for a check under your business name and start using it for all business payments.
Also, consider using this checking account to pay all suppliers and vendors. That way, you can start to build a good business credit score. Additionally, it’s a good option to acquire a business credit card and pay it on time. Besides business loans, credit cards make for an excellent tool in building a good business credit score.
Constantly Monitor Your Business's Credit Report
After building your business's credit score, it’s essential to monitor it regularly. Regular monitoring allows you to know if it’s going up, down, or stable. This way, you get to plan and execute an appropriate action.
You need to monitor your business credit report from the three business credit reporting bureaus: Equifax, Transunion, and Experian. These credit bureaus acquire data from different sources. So their reports may be different from each other. You don’t have to worry about this, though.
Equifax considers a business score of 660 and above a good to excellent credit score. For Transunion, the figure is 658 and above. Lastly, for Experian, a good credit score will be 670 and above.
To Sum It up
You only need to remember that having good business credit is to do the right thing, especially when it comes to your business's finances and payments. Once you’ve built your business credit, make sure to maintain the high score. That way, you can qualify for the many benefits that come with having a good business credit score.
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