If you are the owner of a company, it is never too late to build business credit - or to improve your credit score. Credit is a little bit like liquid capital – you can use it to produce merchandise, pay for overhead costs and take care of the miscellaneous expenses that help a business run efficiently. Depending on your credit limit, you could potentially take your business from a low producing company to a high producing company, thus drastically increasing revenue and securing the success of your business. Without good credit, your business may never grow – in the world of commerce and business, stagnation could mean death in certain industries. Here are five effective ways to build credit for your business.
- Pay all of your outstanding debts. Paying all of your debts is one of the best ways to improve your credit standing because it will put your business in the clear. Being clear is critical, because it will open up opportunities to extend credit lines and establish credit lines. However, if you have a number of outstanding debts, you will need to take care of them before you move on.
- Apply for a business credit card. Another great way to establish credit is to apply for a business credit card. There are many business credit cards that you can sign up for. You can apply for a basic card – with a relatively low limit – so that you can slowly build your credit, or you could go for a high maximum, but you need to make sure that you pay your credit card bills at the end of the month. If you can’t, you may want to be a little more fiscally realistic.
- Take out a line of credit at your bank. With no credit, it may be difficult to get approved for a loan, but it is certainly not impossible. You can use other assets as leverage. For instance, you can take out a loan against a car or property. You don’t want to take out a big loan – something manageable and something that you can pay back with purchase orders. If you can pay back your loans, your credit will improve.
- Remove inconsistencies from your business credit score. It is also important to remove any inconsistencies that may be building up on your credit report. These mistakes can be like anchors that cause your score to drop to unhealthy levels. Some inconsistencies may be left from creditors that did not take the time to clear your company. After you clear these inconsistencies, it will take a few months for all of them to be cleared from your credit report.
- Legitimize your business. Another great way to build and improve credit is to legitimize your business. If your business isn’t set up as a limited liability corporation or some kind of proprietorship, it will be hard to get loans, apply for credit cards or set up lines of credit. In the end, you want to make sure your business is a legal entity in your state – or else your credit may never improve.