Building Business Credit: 5 Tips To Get You Started

As a business owner, you need to establish business credit to facilitate your company’s growth. It’s primarily used by lending institutions, suppliers, and other entities to determine whether they should do business with you. Without good business credit, your company might not achieve fiscal success. However, building business credit can be challenging if your business is new.  

If you want to establish business credit, below are the five tips to consider to get started: 

1. Set Up Your Business  

Before anything else, you need to set up the foundation of your business to build credit separate and distinct from your personal credit standing. This is especially true if your company is new and just getting started.

To help you establish your business, it’s essential to make it appear professional and reliable to lenders, clients, suppliers, and potential business partners. This could mean getting an active phone number and a legitimate email address. Also, you need to ensure you have a physical address where people and business entities can locate you for specific business transactions.  

Once you set up your business, the lenders, vendors, and your clients will see that you can be trusted as a business partner, which can help slowly establish your business credit.  

2. Secure Credit Accounts That Report To Business Credit Reporting Agencies

This is another thing to do to build business credit quickly. When you have credit accounts with other business entities that report to business credit bureaus, you’ll have an opportunity to show how you pay your bills on time and manage your credit.  

One of the common examples of these credit accounts is those coming from net 30 vendors who extend a particular type of trade credit to businesses. You’ll get an invoice from a vendor or supplier with this credit account which you need to pay within 30 days. If you can make timely payments, the vendor or supplier will report such information to specific business credit reporting agencies, which are used to create your company’s credit profile.  

However, when choosing credit accounts, select those that report your purchases and payments to credit bureaus. For example, if you’re looking for the best credit accounts for your startup business, you can check out this list of net 30 accounts which you can choose from. By applying for these accounts, you can establish business credit that will be essential in your future credit applications with lenders, vendors, and suppliers.  

3. Open A Business Bank Account

To build business credit, it’s also crucial to have a business bank account that separates your personal and commercial expenses. Lenders usually use it to check your capacity as a business to borrow a certain amount of money and pay it on time.  

As such, you have to apply for a bank account as soon as your business starts to operate. Also, make sure that the account has information related to cash flow to show the lenders that you can be a reliable business borrower. With this, you would be able to set up a good credit score and standing for your business.  

4. Pay Your Business Taxes

As a business owner, you also need to pay your company’s tax liabilities to the government. Failure to make the necessary payments can result in serious legal consequences, such as fines, legal trouble with your state’s taxing authority, and a negative impact on your business credit.  

Hence, if you’re looking to establish your business credit, always file all your company’s tax reports and pay your tax dues. If you need help with the tax filings, you can seek help from tax experts in your area to ensure your business’ compliance. By complying with your tax obligations, lending institutions and other business entities will see that you pay what your company owes.

5. Pay Your Bills On Time

Aside from your business taxes, your company should pay its bills on time and without further delays. Doing so can help you build your business credit over time. Generally, past payment history is one of the things lenders look for before extending credit to your business. It also plays a crucial role in the computation of your credit scores and the establishment of good business credit.  

With that said, make sure you have an excellent payment history for a certain period. Any delay in paying your bills can significantly impact your ability to set up excellent business credit as quickly as possible.  

Bottom Line

Having business credit is essential for your company. It can help you obtain various credit services with flexible rates and terms and conditions and attract more vendors and suppliers to become your business partners. Therefore, if you have a startup company, keep the information mentioned above in mind, and you’re on your way toward building your business credit.