In business your goal is to constantly improve and innovate. To innovate, you not only need motivation and creativity but also money to get the job done.
Businesses incur many expenses and you may not always have cash on hand to make those purchases, but you have options: obtaining a business loan. Whether you go the traditional or non-traditional lender route, they are going to want to understand your business credit.
As an Inc. article says, “A good business credit score is a key tool for building your small business.” Why? Because while having a good personal credit score is great, proving to lenders or potential investors that your business stands in good credit opens up numerous opportunities for you. Those include possibly lower interest rates on financing, better terms with product or service suppliers, or a way to provide a positive “financial snapshot” to anyone who is interested.
Another big difference between personal and business credit is the way it’s calculated – and the ways you can continue to improve it. Business credit runs on a 0-100 scale, where personal credit scores as you know typically range from 350-850.
So how do business owners improve their business credit? Direct Capital will tell you.
- Apply for a D-U-N-S®Number: Certainly by now you’ve heard of Dun & Bradstreet, the largest business credit reporting agency out there. They assign nine-digit numbers, like a social security number, to uniquely identify businesses to credit reporting agencies. Use this number when you apply for business credit. In fact, many organizations will require you to provide this number prior to working with you. Apply for yours at dandb.com.
- Use Your Business Credit Card: It’s probably become a habit for you to use your personal card for all expenses including business ones. Well if you are looking to build up your business credit, it’s time to start separating business from pleasure. The more purchases you make on your business card, the more your card issuer will report that information to credit bureaus, thus improving your score.
- Make Payments on Time: Once you use that card to make business purchases, it’s important to always remember to pay the bill on time. Having a credit card and using it is good for building credit, but you have to make consistent timely payments to improve it.
- Show Your Credibility: Author of Business Credit Decoded Ty Crandall said that potential creditors will want reassurance that your business is trustworthy and legitimate. How can you do this? Easy – have a good quality website, a professional email address, a business mailing address, etc. This way, when you sign up for utilities, loans, or leases, your business is building a credit track record.
- Always Check Your Business Credit Report: This becomes even more important in our line of work – financing. When applying for a lease or a loan through a lender, they are going to ask for your credit statements. If they see any red flags, they will ask you about them so it’s good to be prepared and know ahead of time what your credit report looks like. Plus, periodically pulling the report will let you know where you stand and whether or not you need to use the above tactics to improve.
At Direct Capital, we’re all about helping small business grow and improve. Whether you need more business tips or would like to get started with a financing solution, we’re here to help. Give us a call at 866-777-0117 or click on the banner below!