Even the smallest business has a credit score, which plays a major role in how businesses can borrow money.
The first thing lenders will check on a business loan application is a credit score. But do you have a credit score for your business?
Many businesses don’t understand how to build a business credit score. If you haven’t started building one yet, there is no better time than now.
Here is what you need to know about building business credit for your company.
Start With Your Business Formation
When it comes to building your business credit score, it’s important to start with your business formation. This will give you the foundation you need to start building your credit score.
By incorporating your business, you’ll be able to establish a business credit history. This, in turn, will help you build a strong business credit score.
Get Your Employer Identification Number
If you want to build a good business credit score, one of the first things you need to do is get your Employer Identification Number (EIN). This is a nine-digit number that the IRS assigns to businesses. It’s used to identify businesses for tax purposes.Â
To get your EIN, you must fill out an online application on the IRS website. Once you have your Employer Identification Number, you can start using it to apply for business credit.
Open a Business Bank Account
One of the best ways to build a business credit score is to open a business bank account. This shows lenders that you are serious about your business and are committed to making timely payments. Make sure to use your business account for all of your business expenses and pay your bills on time.
Build Relationships with Vendors
To build a good business credit score, you need to develop relationships with vendors. This means paying your bills on time, every time. You also need to communicate with your vendors if there are any issues with payments.
If you build a good relationship with your vendors, they will be more likely to report positive information about your business to the credit bureaus.
Make Use of Your Credit Card
If you are wanting to build up your business credit score, one way you can do that is by using your credit card. This will help show that you are responsible with credit and can help you get approved for loans in the future.
When using your credit card, make sure you make your payments on time and in full to avoid damaging your credit score. Also, try to keep your balances low so you don’t appear to be maxing out your credit cards.
Pay Earlier and More Often
Paying your bills in full will help to improve your credit score. To make sure that you always make your payments on time, you can set up automatic payments with your creditors. This way, you will never have to worry about forgetting to make a payment.Â
Give Importance to Your Business Credit Score
Business credit scores are important because they show lenders how well you manage your business finances. A high business credit score means you’re a low-risk borrower, which could lead to better loan terms.
A low business credit score could lead to higher interest rates and could make it difficult to get a loan. If your business needs financing, take steps to improve your business credit score.
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