How To Build Your Company’s Credit

By | March 30, 2018

If you just began the entrepreneurial journey, you must know everything about the importance of building your company’s credit. Read on to know more.

How To Build Your Company’s Credit

Was being an entrepreneur always your dream? Did you just start the journey of your dreams? Congratulations! That’s a big (and daring) step indeed. Let us tell you that the entrepreneurial journey is full of ups and downs. Don’t be scared. The good news here is that if you take some well-calculated steps, you can actually avoid the ‘downs’ part. Yes. Don’t worry. We’ll help you with that. One of the foremost steps you need to take towards ensuring the financial security of your business is—building the company credit.

Additional Reading: 5 Ways to Raise Money for Your Business

Why do you need it? No matter how much your company is growing right now and how good things are turning out to be, you can never predict the future. Your business could land into a financial pitfall and you might need some immediate funding to recover. At that time, you might have many options, but to apply for a business loan. That’s when a good company credit will save you (and your business). The chances of your loan getting approved increases considerably if you have a good business credit to support your loan application. This reason isn’t enough? Do you need more? Here they are:

You get to avail loans from the best lenders

Getting a loan is good. But getting it from the top lenders is even better. Apart from better security, you also get an array of other benefits like better interest rates, more prepayment options and better flexibility. You won’t want to let go of such options, will you? We thought as much. Having a good business credit can, therefore, help increase your lender options and let you choose the best one possible.

More capital access

Having a good business credit also means that the lenders will consider you to be a reliable person and won’t hesitate from lending you bigger amounts of money. While screening your loan applications, lenders generally take your personal and business Credit Scores into account. If any of the two is lower than expected, the chances of a loan approval drop down considerably. Therefore, to avoid any such situations and get better access to more credit, you must start building your Credit Score as early as you can.

Great interest rates

While applying for any kind of loan, the first thing that you need to check is the rate of interest. Before signing the final loan agreement, it’s advisable that you read through the fine lines and get to know everything about the loan details. The most important part of these details is the interest rate, of course. How can you get better interest rates? Well, a good business Credit Score is the answer to your question. As your Credit Score increases, the rate of interest goes down.

Your personal credit is protected

First of all, we hope that you’ve kept your business and personal accounts separate. Using your personal Credit Cards to meet your business expenses can prove to be really toxic to your Credit Score. If you keep maxing out your Credit Cards to buy office inventory or invest in other office expenses, it’s going to leave you shattered (credit-wise). You might feel like using your personal credit for now and think that you can compensate later. But trust us, that’s not a great idea. Unknowingly, you’ll create a black hole in your credit and recovery from it will be next to impossible. You don’t want to do that, do you? That’s exactly why keeping your business and personal credit separate makes a lot of sense.

Now that we’re done looking at the importance of good business credit, let’s see how you can build a rocking credit for your company.

Keep a check on your personal credit

Your personal credit plays a vital role in deciding the overall credit of your company. Before looking at other ways to build your company credit, you must first think about your own finances. It doesn’t require much of your time or effort. All you need to do is the usual stuff. Pay all your bills on time, don’t miss EMI payments, try and make full payments towards your Credit Cards instead of paying half or less than that. Most of the lenders make it a point to first check your personal credit before sanctioning a business loan or a business Credit Card. Avoid maxing out those personal Credit Cards. If you feel that your credit limit is low, either apply for a new Credit Card or speak to your card issuer about increasing your credit limit. That’s way better than maxing out your Credit Cards every now and then, isn’t it?

Need some credit? Apply sooner.

If you’re just starting out as a business, the chances of any lender giving you an instant credit approval are pretty slim. They need to see your business credit and consider your startup as a well-established firm before lending you money. So, don’t wait up until your minor need for money becomes a financial emergency. Start building your company credit as soon as you start the business. Don’t worry! There are a couple of ways to do that. We’ll cover them all for you.

Apply for business Credit Cards

Credit Cards can help you build good credit. It goes without saying that to build good credit, you need to follow the routines and pay your bills on time. A missed Credit Card payment can mean trouble. Not just your business Credit Cards, you need to take care of your personal credit as well. This means more than your personal Credit Cards. You must plan your monthly finances such that you don’t miss any EMI payments towards loans or other financial commitments.

One is not enough

If you think that establishing good relationships with one lender is enough, let us tell you that it isn’t good enough. Have you heard about something called a backup option? That’s exactly what you need to have.  There are high possibilities that your current lender changes its lending policies and might not give you a good enough notice period. In such a situation, you can’t just cut your credit limit overnight. That’s when your backup lender will act as your knight in shining armour.

Choices. Some more choices.

The game of having backups doesn’t just end here. You need to keep other lending options open as well. Banks aren’t the only lenders. You can look for other alternatives as well. Like asset-based lenders. Why? Because they won’t just take your credit to be a proof of your creditworthiness. Since for them, it’s a collateral-based loan, getting a loan is always easier. If you don’t want to get into all these hassles, you could also consider options like peer-to-peer lending. Try talking to your friends or relatives and see if you can borrow from them. It’ll help you save a lot of interest. Interested now?

Building and maintaining the company credit is one of your main responsibilities as a business owner. With the above-mentioned ways, you can surely build/improve your company’s credit. Like we mentioned before, getting a Credit Card is an important part of building your credit. So, what are you waiting for? Get one today!

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