Approximately 61% of all small businesses have problems having the cash flow they need on hand. Lack of cash available to pay vendors and other business expenses on time hurts your business' credit.
Building business credit is one way to ensure your business has access to funds when its cash flow falls short to pay expenses time. Having good credit is key.
Besides making a commitment to paying your business' bills on time - every time, here are five other useful tips for increasing your ability to obtain credit for your business.
1. Business Accounts
Open a checking account in your business' name. Open credit files with the three major credit reporting agencies (Equifax, Experian, and TransUnion) and Dun & Bradstreet.
Using your business checking account to pay your bills will help differentiate your personal credit from that of your business. It will keep one from affecting the other, but also allow your business to build its credit faster.
2. Company Credit Card
The benefits of obtaining a business credit card are many. By using y our business bank account to pay your business credit card in a timely manner is one of the best ways to raise your business's credit score. Credit cards report regularly to the major credit reporting agencies which help establish your business' credit history.
3. Lines of Credit
A line of credit is a pre-determined limit a lender will allow you access to in order to obtain the money you need to run your business. Your business may qualify for a higher credit limit than it would with a credit card, and depending on its credit history, the interest rate may be lower.
Your bank may be a good source for obtaining a line of credit, but be sure to shop for the best interest rates. With a line of credit, your business won't pay any interest until you actually draw on the money available.
4. Take Out a Loan
Taking out a loan is a good way to build business credit provided the loan payments are paid on time and get reported to credit agencies. If your business has no credit or bad credit, a bad credit business loan is an option for you. While the interest may be higher than a loan you could get with good credit, timely paying off the loan will help raise your score when its time to take out loans in the future.
5. Review Your Credit Reports
Keep your business' credit reports up-to-date and accurate. Obtain copies of your credit reports from the three main credit agencies listed above and Dun & Bradstreet at least once per year.
If you notice any errors, start working on getting them corrected immediately. Also, check for signs that your business' identity isn't being used by someone else. This will help to ensure that your credit score will allow you access to the lowest interest rates when it comes time to get credit or loans to expand your business.
Start Building Business Credit Today
Every day you can work on building business credit by keeping an eye on your expenses. It will help determine when its time to get access to funds so your business can pay its bills on time.
Looking for additional articles on managing your business' expenses and cash flow? You can find them under the Finance tab on our website.
