Building Your Small Business Credit
Financing is essential for many small companies and if you need a loan, you want to make sure you’ll be approved. Your small business credit score is one of the most important factors in determining whether you qualify financing. Additionally, there are many other advantages that come from keeping your business credit score high. Here are some ways to improve your credit history so you can get the financing you need.
Have a Zero Tolerance Policy for Late Payments
If you are having cash flow issues, it can be tempting to make a few late payments. However, late payments can severely damage your credit quickly. Conversely, making your payments early can actually help your credit score. Depending on which credit bureau you are using, you may even earn a perfect score for making early payments. By tracking your business finances closely, you can make sure your cash flow allows you to avoid late payments for better small business credit.
Make Sure Your Public Record Is Clean
Credit bureaus look at other factors besides just your payment history. Your credit report will detail any financial issues of your business such as bankruptcy, liens, and other matters of public record. This information can stay on your credit report for years and affect your ability to qualify for loans. Do everything you can to avoid being in difficult financial circumstances such as these.
Choose Lenders That Report to Credit Bureaus
As much as you want to prevent your small business credit report from detailing damaging information, you also want it to highlight your positive financial interactions such as on-time payments. Not all lenders report payment history to credit bureaus, so be sure to choose your lender wisely. When you get your loan from a lender that reports to the credit bureaus, you can rest assured that making your full payments on time every month will boost your credit score and make your business more creditworthy in the future.
While the most common reason to build your small business credit score is to secure financing when necessary, there are also many other benefits. A good credit score indicates your business is reliable and financially stable, and can attract new customers. Additionally, you may be able to qualify for lower interest rates on your loans. One important aspect to keeping your credit score high is to always make your payments on time, and even early if possible. It’s also important to stay out of financial trouble that becomes part of public record, such as bankruptcy. Finally, make sure you apply for loans with lenders that will report your payment history to credit bureaus so you can make sure you are building your credit score with every payment.