Credit is as good as gold, and a good credit score is the key to success. This is why it is so important to establish good business credit. Not only will good credit increase your chances of getting accepted for loans and other lines of credit, but it will also help your company seal investor capital. In some industries – especially industries that have large upfront costs – having credit may mean the difference between success and failure. When building credit, there are a number of considerations to keep in mind and there are many avenues you can take to build good credit. Here are five tips for establishing business credit fast.
- Separate your finances from your business finances. One of the quickest and most efficient ways to establish business credit is to separate your personal finances from your business finances. The best way to do this is to incorporate your business as it’s own entity. This will effectively wipe clean any personal debts that may be poisoning your business’ credit.
- Start using business credit cards. After you incorporate, you want to apply for a business credit card. In order to get approved for a business credit card, though, you need to set up an LLC – otherwise you won’t be eligible. In some cases, you may want two business credit cards – one for miscellaneous expenses and the other for more specific purchases, like air travel. The key is to create a credit history through your purchases, but you also want to reap some of the rewards that credit cards have to offer, like air miles and bonus points.
- Close debts and pay back old loans. It is also important to close any old debt and pay back outstanding loans. If you have the capital to pay back these loans, you don’t want to wait – you want to work out a settlement agreement right away. The longer these debts are left open, the more it will effect your credit score. Paying off these debts will eliminate them from your credit history and they will boost your score.
- Open a line of credit with a manufacturer. If your business works closely with a manufacturer to produce a product, you may want to set up a line of credit. This line of credit will make it easy to manage cash flow and it will keep a healthy amount of capital in the coffers, but it will also help establish business credit. Make sure, though, that you pay all invoices with your manufacturer before the agreed net term – otherwise you will damage your credit score.
- Remove discrepancies from your credit report. There is also a chance that your business has a number of discrepancies on your credit report. These discrepancies may be affecting your credit score. This is why you want to review your credit score and then resolve any errors. You can do this by calling various creditors and closing accounts. In the end, this is one of the quickest and easiest ways to establish good business credit.