Business Credit Score Basics: Building your Credit Score
A strong business credit score is integral to business growth. Benefits include better interest rates, lower insurance premiums, favorable lease terms, and increased access to capital through business loans and lines of credit. Additionally, establishing business credit allows you to separate your personal and business finances. Here are some tips on how to build a healthy business credit score.
The first step in boosting your business credit score is to establish business credit that is clearly separate from your personal credit. You can accomplish this by creating a limited liability company, or LLC, or by incorporating your business. Apply for a DUNS number with Dun and Bradstreet to identify your business location, and obtain an employer identification number, or EIN, from the IRS. To begin building credit, apply for a credit card exclusively for your business.
Have Vendors Report Payments
To boost your business credit score, work with vendors that allow you to pay on terms and report the payments to credit bureaus. To create top scores, build a history of early payments to your vendors.
Closely Watch Credit Reports
Errors and discrepancies in credit reports can negatively impact business credit scores. Check your business credit reports several times a year, and if you detect any anomalies, report the problems to the business credit bureaus, and request corrections.
Maintain Cash Flow With Business Credit
A healthy business credit score helps you maintain company cash flow by obtaining favorable terms with suppliers and easier access to funding. Using your company credit card can be a temporary solution to a cash shortage through quick financing with reasonable interest rates. Calculate the overall cost to ascertain if this solution is the right one for your business, and avoid revolving a credit card balance, which may make the interest expensive.
For more tips on business credit scores and other aspects of business finance, get in touch with 8th Street Capital.