There’s no way around it: building business credit is a long-term process. Establishing strong business relationships and a positive credit history takes time. Don’t let this deter you. If you would like to be able to secure financing in the long term, it’s important to start building business credit now and not later. There are some simple steps that will set you up for success.
From basics like incorporating your business to registering with business credit bureaus, you may as well maximize your chances from the get-go for building a positive credit history.
If you own or are starting a new business, you will want to heed the following steps closely. If you are already established, you may want to skip through the first few—although it’s impossible to underestimate the importance of getting the foundations right.
The Foundations of Good Business Credit
Incorporating your business is a crucial first step. Until your business is a legal entity that is largely distinct from yourself (i.e. you are not functioning as an independent contractor and instead as a sole proprietorship, LLC or corporation), you will be unable to build business credit. Certainly you can still finance your business on your own dime, but there are a number of reasons why that is a precarious situation to be in—and far from ideal at best.
Conforming with required licensing and other corporate procedures is equally important. If you’re not legally allowed to operate your business, you may as well not be running a business at all in the eyes of creditors.
Registering With Credit Reporting Agencies
Once you have set up a legal structure for your business and complied with the necessary licensure practices in your industry, it’s time to register with a credit reporting agency. Agencies like Dun and Bradstreet allow easy registration and credit profile creation that will give potential clients and lenders insight into your business’s creditworthiness. Having your business’s financial information publicly available fosters trust in your business and can improve your creditworthiness.
After your business credit profile has been completed, be sure to add existing trade references and make sure that your file is up-to-date and error-free. Otherwise, your business’s positive track record may pass unnoticed by potential lenders.
[Photo Credit: Cfs.ezabu]