How to Build Business Credit to Increase Chances of Obtaining Financing
Sooner or later, most business owners become aware of the fact that they will need strong business credit in order to secure financing for a loan. Unless your business happens to be in that very small minority which has never needed financing for day-to-day operations or for future growth, chances are you will need to take out a loan at some point.
Most loans are rejected for reasons of poor credit history or for insufficient history, so it’s definitely to your advantage to do whatever you can to establish stronger credit history prior to applying for your next loan. Here are a few things you can do to start working in the right direction.
Check your Baseline Credit Scores
Before doing anything else, check with the major business credit score bureaus to find out where you stand right now. If there are any inaccuracies on your credit history at any of these bureaus, work to get them removed, even if you have to hire an agency to help with that. You need to be sure you’re starting out with an accurate representation of your business history.
Pay Your Vendors Early
When you pay your vendors late, that could be a mark against your credit history, especially if you work with vendors who routinely do report that to the credit bureaus. You can make this work to your advantage however, by paying your vendors early and keeping them happy. You should suggest to your suppliers that they report your early payments, so your credit history starts becoming cleaner.
Build Supplier Relationships
Simply by buying the materials that you need to run your business from trusted suppliers, you can be building credit history that works to your advantage. Many suppliers will allow trade credit, which lets you pay for your raw materials over several weeks. By being prompt with these payments, you’ll be building positive credit history, and creating solid relationships with suppliers and partners.
Remember your Public Records
Public records which are filed in the name of your business are generally included on your business credit report, and if you have any negative transactions here, that will definitely count against you. Such lines as judgments, bankruptcies, and liens are all things that stay on your credit history report for years, and these can undo all the good work you’ve done trying to establish good credit.