Boosting Your Business’ Credit Score

It is often said that the first year of business is the hardest for entrepreneurs but whichever way you look at it, there is nothing to the first year if the business does not grow. One of the greatest challenges for new business owners is to convince creditors that any credit facility extended to them will be paid in full and in line with the repayment scheduled agreed upon. To finance gradual steps and mitigate delays, good credit cards can act a fallback plan when an expansion is aimed at.

Many new businesses survive by sheer luck especially if no outsider decides to partner with them. The irony of credit as many business owners will attest to is that it is much easier getting it when it is not needed. Just like people develop personal strategies of how to have good credit; it is possible to build a good credit history for your businesses that will enable it to attract business loans and credit lines.

Be aware of your personal credit rating – when a business is just starting out, there is no way of establishing its creditworthiness. Lenders will in most cases rely on the owners’ score to award credit. Typically, if your credit score is in the mid-600s, that is enough leverage for lenders to use. If you are concerned about how to have good credit for your business, start by boosting your own credit score. You can do this by paying bills on time and utilizing less than 30% of your available limit. Every shareholder, business partner or investor will be subjected to a credit score analysis so it is important to establish personal creditworthiness even before commencing business operations.

Apply to get loans and credit lines before you have a use for them – building a credit history for your business takes time and it would help if your first application for credit was done as soon as you begin to operate. One of the requirements for obtaining a credit facility from a bank or other financial institution is that the business is in operation for at least two years. To get around this requirement, apply for good credit cards facilities for your business or a small loan. Since the business is still young, these facilities might be hard to come by; consider a store-based line of credit or applying for a secured good credit cards. If you are looking to build credit the old fashioned way, make business purchases from retailers who sell office supplies on credit.

Once your credit grows, use it – after you have successfully applied for a credit card in the name of your business, use it as soon as possible. This should then be followed by an application to increase your loan limit. As much as possible, keep your credit line busy because it will indicate to creditors that your business is able to sustain itself.

Work with multiple lenders – while it is a good idea to have all your financial issues handled by one institution, credit policies within banks are subject to change without notice. Rather than taking the risk by depending on one finance, spread your risk by taking different products from different lenders. It is often good to have a local bank that has a short approval time for your applications because they know you personally, but dealing with a big bank provides more locations and credit products to suit your needs.

Consider unconventional lenders – while banks are the largest institutions that extend credit facilities, they are not the only ones. If you foresee a scenario where you will have challenges getting credit for your business because of its nature of operations or industry, it may be a sign to get credit from other sources. Secure an investor and collaborate with asset financiers so that lending institutions will get a picture of the business potential.

These alternative channels of getting credit may be a bit costly compared to what you get from mainstream banking institutions. If people know that your business is stable and you have had good relations with a creditor, it is only a matter of time before they begin looking for you.