Starting a business often presents a number of challenges. One of those obstacles is qualifying for credit. Most creditors want to see a reliable credit history for a business entity before lending money. If there is low or no credit history, lenders are less likely to provide credit. Establishing good corporate credit can be critical step to enable a business to grow successfully. Take a look at these tips for building corporate credit.
Seek To Build Credit Before You Need To
For most small companies, start early with building a credit record. Most small companies need at least two years of established business before a financial lender will consider their loan application. Establishing a vendor-based credit relationship or using a secured business credit are two ways young companies can build a credit history.
Hire A Coach
A business credit coach can be beneficial to make the process of building your corporate credit easier. Not only will they be able to educate you, but they can send out letters to creditors and credit-reporting agencies in efforts to clean up a business owner’s personal credit report, which could impact business loans. Coaches will also be familiar with loan products which may fit will with a particular company’s industry, age and credit history.
Make Your Payments On Time
It is vitally important, when establishing business credit, to build a positive credit history for your business. All bills, including vendor bills, utilities and credit card bills, must be made on time. Late payments will have a negative impact on your credit rating, and weaken your chances of securing loans in the future, perhaps at a point when the business needs to be expanded. It might be helpful to set up a profile with Dun & Bradstreet which is a business data and credit reporting agency; make your payments early to optimize the chance of receiving a high score from them.
Keep Your Financial Records Organized and Accurate
It is imperative that small businesses devote some resources to maintaining complete and accurate financial records, particularly of income and expenses, in order to properly report income to the IRS, state and other local governments for purposes of Federal, state and local tax and also local business license fees. A company should allocate some amount of capital to a good accountant who can make sure that tax returns are prepared correctly, and payroll and government withholdings are collected and paid correctly, and can help with cash flow projections if needed. Managing cash flow is a critical issue for small business; adequate cash flow allows small business to pay their obligations on time, enhancing credit and allowing for an orderly procurement of loans (if needed) to meet obligations. Separately it is important to monitor business credit so that any mistakes or breaches are caught early and can be corrected.