A strong business credit profile doesn’t just help you secure a loan: it is also essential for attracting new business.
Unlike with personal credit reports, anyone — including potential customers, partners, and suppliers — can look at your business credit report. Building good business credit can help you get lower-interest small-business loans, business credit cards and better terms from your suppliers.
CUE took insight from Business Credit Blogger, who provides some great recommendations on Building your business credit score. If you want to learn how to build business credit to access better financing options, this is the article for you.
- Leverage your personal credit to your company’s advantage
Revolving credit is a loan with a predetermined spending limit that automatically renews as the debt is paid off. It is an arrangement which allows for the loan amount to be withdrawn, re-paid, and redrawn again in any manner and any number of times until the agreement expires.
You can obtain 4–5 business credit cards that only report to the business credit reporting agencies if you have a good personal credit score. By strengthening your personal credit rating, you can successfully obtain Stated Income Business Credit Lines.
2. Leverage your business bank account to get business credit lines (no personal credit check)
Did you know you can get a line of credit based only on your bank account data, not personal credit?
If you have an existing business with monthly revenue directly deposited into your business checking account, you can access a line of credit with limits up to $100k without any impact on your personal credit. All you do is connect your business bank account, and they automatically review your transactions to assess the health of your business.
3. Leverage your fixed expenses to build business credit
Each business has their own fixed expenses, and the operating costs can vary because some companies are a brick and mortar operation while others may be home-based and operate solely through the internet. However, each small business has rent, payroll, merchant services, phone and utilities, web hosting, internet service, licenses, professional services, subscriptions, and insurance as fixed expenses.
You can pay your fixed expenses on your business credit card each month to establish an ongoing payment history on your company’s credit report. Bear in mind that to build business credit: you would need to acquire business credit cards that only report to the business credit reporting agencies, not personal credit.
4. Leverage your variables expenses to build business credit
Variable costs are expenses which are based upon the volume of business, sales, or the volume of transactions.
When you pay your variable expenses, such as a marketing expense on your business credit card, you establish payment history on your company’s credit report. Similar to fixed expenses strategy, you would need to acquire business credit cards that only report to the business credit reporting agencies.
5. Use a credit partner to jump-start the business credit building process
This tactic is handy in case you have bad personal credit. A strategy for overcoming a personal credit issue is by using a business credit partner. If a spouse, family member, friend, investor, or business partner has good personal credit, they can leverage their good personal credit for your company so it can obtain 4–5 business credit cards.
Partner credit shows diversity in your file right from the onset since vendor credit is short-term financing and revolving lines of credit are the long-term investment.
Keeping a high business credit score is a matter of good financial habits: Make your payments on time, and keep your information up to date. Also, remember that building business credit is a process, and it starts with separating your personal finances from your business finances.
Our team at CUE is dedicated to helping you keep informed so that you can grow your small business and stay on top of your game — if you want to learn more about Building Business Credit can read the BusinessCreditBlogger. Or check out this great article from FitSmallBusiness about how to get a business credit card.
Need software solutions to keep track of your expenses more efficiently? CUE can help! Check out our marketplace and find the best software solutions to fit your small business needs.