Understanding Business Credit
Building a strong business credit profile is akin to personal credit but specific to your company’s financial activities. It reflects the business’s risk or ability to repay loans and other financial obligations. A solid business credit score is derived from factors including payment history, debt levels, credit utilization, and general company information.
How to Build Business Credit
Establish Your Business
To build business credit, start by establishing your business as a legal entity and opening a business bank account. A D-U-N-S number from Dun & Bradstreet will also begin the credit file process, which may take three to six months to build.
Maintain Good Credit Practices
Make timely payments and establish relationships with creditors who report to credit bureaus. Using a business credit card responsibly and keeping credit utilization low helps to build a positive credit history.
Avoid applying for multiple loans simultaneously, as hard credit checks can affect your score negatively. On-time payments and low credit utilization are key strategies on the path to strong business credit.
Benefits of Strong Business Credit
Having excellent business credit allows for faster loan approvals and higher lines of credit. It can also help you secure better financing rates, beneficial insurance, and more favorable terms with suppliers—crucial factors in funding and expanding a startup.
Quick Tips for Faster Credit Building
- Request a D-U-N-S number
- Make on-time payments
- Keep credit utilization low
- Avoid excessive credit checks
Remember, like personal credit, it takes time and diligent management to establish and improve your business credit profile.