Many business owners are not aware that they need to build business credit or that it even exists, let’s not even go into how they don’t know that it affects their company and finances.
The thing is that if at some point you need to borrow financial funds to get new equipment or to invest in your business growth, business credit score shows the lenders how responsible you are as a business owner when it comes to money management and whether you are reliable to pay back the borrowed money.
Basically, the business credit score is the factor that can ensure necessary small business financing to take your company to the next level, or it can be the reason for rejection when applying for business loans.
Can you see now how it is of utmost importance?
Camino Financial can help you learn how to build business credit, something that is vital to improving your company’s finances in the long run. It might sound like a complicated thing to do, but it’s not.
We’re here to explain how to do it and walk you through the whole process using a real-life example.
Learn How to Build Business Credit
There are a lot of ways of answering the question “How to build business credit score?”, some more complex than others, some would be very long.
We think that the easiest way is to tell you the story of how a small business owner applied for a business loan but got rejected because of his poor business credit score.
Mike has been running a sandwich shop for almost two years, he always knew that his business had a lot of potential, but he also knew that in order to exploit its full potential he needed additional funds.
He wanted to purchase new equipment to ease his employees’ work and increase their productivity. Besides, Mike wanted to buy more chairs and tables for the dining area, as well as to invest in the storefront to bring more customers and increase his profits.
So, he decided to get small business financing through a business loan. Unfortunately, he got rejected because of his poor business credit. However, he wasn’t discouraged (or this story would be very short and wouldn’t have any valuable lessons), so he tried with another bank.
He got the same answer with the other bank.
He decided to give it go with an untraditional lender but got rejected again because of the insufficient business credit. However this time with a little difference. The loan specialist explained to Mike what was going on and that he should do to build his business credit.
- They told him to make his payments on time because this would show lenders that he knows how to pay his debts.
- They told him to keep his income and expenses balanced. In other words, his debts shouldn’t be higher than his disposable revenue.
- They told him to keep a good relationship with his food suppliers because when they allow him to avail of products and pay later, then he would get trade credits that would boost his business credit score.
Mike followed these pieces of advice and, after a few months, he applied for a business loan. This time he had a good business credit score, so his request was approved and he got small business financing.
Now, Mike’s sandwich shop is equipped with modern tables and chairs, as well as new equipment. As a result, his employees work more efficiently and he has more satisfied customers.
Score Big Time With Good Business Credit
As all entrepreneurs out there, you are constantly looking for new ways to grow your business. Whether you want to achieve it through marketing, using the latest technology or investing in your staff, they all require investments in the form of additional money.
Hence, you will probably need a business loan to make it happen and expand your business. In order to get that business loan, make sure you have a good business credit score.
As you’ve seen, it’s not complicated nor difficult to build a business credit score. You don’t need to be a financial expert to do so, either. All you need is discipline and responsibility when it comes to money management, and your business loan application will be definitely approved.