A strong business credit score can help you obtain lower insurance premiums. You might also be eligible for a lease or business loan.
Business credit can also be obtained to help you manage your personal and professional finances.
You might be required to sign a personal guarantee when you open a business loan or credit card. You could lose your personal assets.
Now let’s look at seven different ways that you can build and manage business credit, once we have reviewed the benefits.
Check your personal and company credit
Uncertain if your company is creditworthy? There are many methods to determine if your company is creditworthy.
It is not required that credit agencies give free access to your personal credit report. Nav assists business owners with managing their credit.
Establish your business credit If you don’t see any information in your credit reports, it could be that your business has not established credit yet.
This could happen if your company uses a personal credit line. You will not see your credit report if you pay for these payments.
Some models of business scoring generate business credit scores based upon personal and business credit histories, while others rely solely on information about your company.
Apply to a Business Credit Card
Accounts and vendors will be required to report payments to credit agencies in order for your business credit profile to grow. A business credit card is a great way to get started.
Business credit cards can provide benefits and rewards that are more beneficial for business owners than personal credit.
Another way to help establish your business credit profile and develop your business credit is by obtaining a business credit card. Business credit cards allow business owners to pay for necessary expenses without large amounts of cash flow, and at the same time help build a business credit history.
Most come with higher credit limits and bonus rewards that you won’t find with personal credit cards.
Here are some benefits:
More Spending on Business Tools – Business owners, especially startups, can use higher credit limits to invest in the necessary business software and tools they may need. Business credit cards allow you to build business credit as your cash flow increases.
Purchase Protection – Unlike cash purchase methods, business credit cards often come with purchase protection in the event of loss, theft, or damage.
Rewards and Refunds: Many credit card companies offer rewards for spending, for example, points or miles for travel. Some offer cashback bonuses after reaching certain spending thresholds.
Building a business credit history: Perhaps the most important advantage for our purposes is the ability to build a business credit history. Making your credit card payments on time or early is essential to establish a reliable credit history. This will improve your business credit profile and your credit reporting agency score.
Partner with vendors who report payments
Open a business credit account with vendors who report payments to the credit bureaus.
There might be providers that you already pay on terms. It is worth asking your provider if they report your payments.
Common question
What’s the difference between personal credit and business credit?
Although they are not identical, they serve the same purpose: to help suppliers and lenders determine your creditworthiness, financial standing, and other factors. While some business credit scores take into account your personal credit, they are not able to consider both your personal and business credit.
You should pay these providers in advance
The Dun & Bradstreet (r) is a commonly-used business credit score. It ranges from 1 to 100, with 100 being the highest. Your payment history will determine your score.
You can score a high score of up to 80 points by paying on time. However, many business owners don’t realize that in order to achieve the highest PAYDEX score you must pay providers in advance.
You can use your business credit to manage your cash flow
Building your credit score can help you get lower rates and better terms from vendors. Both of these can help you manage cash flow, which is the lifeblood for many businesses.
Check your credit reports for businesses
Fraudulent activity and mistakes can impact your credit score and make it more difficult to borrow money.
It is a good idea to check your business credit reports for errors at least once a year. If you find one, you can file a dispute with that bureau.
Conclusion
It can take time to build credit. It can be slow to build credit.
You can check other finance-related articles here. Also if you have any other questions you can ask in the comment section.
