Top 3 Ways to Build Good Business Credit

Tuesday, November 6, 2012

Top 3 Ways to Build Good Business Credit

Even With Bad Personal Credit

In order to get your business up and running, you need to finance it. When it comes to financing, you can either decide to use the cash you have saved over the years or look for a loan. Looking at the current financial situation, most of us don’t have free cash that we can direct to our businesses.

Therefore, one has to look for creditors who can provide the much-needed loan. Before you can acquire a loan, you need to prove to the creditors that you are capable of repaying the loan. It becomes difficult to get a loan when you have bad personal credit. Even though, you still have the option of going for bad credit loans, you should strive to improve your business credit in order to improve your future chances of getting even bigger loans. The following are ways of building good business credit.

Build a legitimate business

A legitimate business is one which is separate from the owner and has met all the legal conditions. Once you separate yourself from your business, you also separate the credit history of your business from yours. This means that even if you have bad credit, you can still get business loans as long as your business has good credit. Other measures that you should take to come up with a legitimate business are: getting an EIN from the IRS, having a physical business address and phone number, setting up a bank account, getting a professional business plan, a business license and good financial records.

Improve your personal credit

Even though you might succeed in improving your business credit, you still need to work on your bad credit. This is because of the reason that when your credit is poor, you will have to pay a high interest and insurance rate. These rates are high because of the risk involved in lending money to those with bad credit. 

Furthermore, some lenders will not agree to lend you money if your personal credit is not good. In order to improve your rating, you should start reviewing your credit report regularly to see whether there are any discrepancies. Before your credit score becomes good, you can always access bad credit loans from various lenders.

Look for trade credit

Trade credit is a type of business to business loan and is actually the largest source of finance you can rely on when starting a business. This form of credit can be very handy especially for such expenses as furnishing your office and dealing with vendors. When you get such loans, ensure that you pay them back in full within the time agreed. This will go a long way in improving your business credit. Bear in mind that credit scores for business range from 0 to 100 unlike personal credit scores which start at 300 and end at 850. Also, if your business is online-based, you should take advantage of transacting with PayPal as it charges less fees compared to other merchant services.

Once your business has acquired good credit, you will be in a position to seek even larger funds or bad credit loans for your business. 

Author: Janice Thompson

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