If you want to take out a loan as an individual for a home, a car, for school or anything else, your credit report and credit score are incredibly important. While they aren’t the only thing lenders look for, they are definitely one of the few most important. A good credit score means a lower interest rate and often more money, while a low score can mean a higher rate and even a chance that you will be denied credit altogether, which can be very stressful and disheartening.
In a similar vein, businesses often need loans as well and just like with individuals, their credit is something that is considered to be very important when deciding what to loan them. However, many people know how to build up their credit as an individual, but might be lost when it comes to building up the credit of a business. Here are a few ways to build up the credit of your business.
Your Business Needs to Be on the Map
It is hard to establish any sort of credit when you are hardly established as a business. As a result, you need to put yourself on the map before you start to think about borrowing money or building credit. Establishing credit when you have barely been opened a day is not going to be a very effective strategy.
You should have a website, be listed in your local directory, and be sure to have your email and phone number displayed publicly so people will be able to reach you and/or visit your business. As you get more customers and establish yourself, building credit will become more effective than trying to do too much, too quickly.
Keep Your Personal Credit in Good Standing
Despite the fact it is your business that will want to secure the loan, lenders will often take your personal credit score and the health of your report into account. Typically, they are looking for a score that is at least 650 or higher, but each lender is, of course, different with what they are willing to work with.
Keeping your personal credit in check and ensuring you have a good credit score is as easy as paying your bills on time, using your credit card responsibly and having a fairly low (under 30% credit utilization rate). So even if your business is in good standing, lenders might look at you as the operator to make sure your credit is in good standing, too.
Have Relationships With More Than One Lender
Having all of your eggs in one basket is never a good thing, and that goes for lending as well. Banks and lenders can change their policies in the blink of an eye and can cut down your available credit just as fast too. So if all of your loans, business credit cards and lines of credit are from one bank, and they change terms, you could be in some trouble.
Instead, you should use different lenders, banks and credit unions for different things, so you always have credit available if and when you need it. For example, you could have a line of credit through one institution, and a business credit card through another.
In conclusion, we hope that this article has helped you learn how you can help build the credit of your business. These tips are by no mean the only ones to try, but they can definitely help. There are also some helpful steps to build your business credit that you can look at, as well, which will help in your journey to build better credit for your business.
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