Business Credit Tips
Building a strong business credit rating
When you apply for a personal loan or home mortgage, lenders generally check your credit score. They want to know whether you’re a good risk and whether you’ll make payments on time. Once that question has been answered in the affirmative, you may be able to negotiate a lower interest rate, more advantageous payment terms or a larger line of credit.
Small companies face similar scrutiny. Although credit bureaus employ different algorithms and consider additional factors when formulating business scores, a strong credit rating can provide your company with substantial benefits. For one thing, it can help you avoid prepayment for materials and services — a good thing for cash flow. It may also place you in a better negotiating position with suppliers and qualify your business for better interest rates and credit terms.
To establish a solid business credit score, consider the following tips:
- Pay your bills on time. When Experian, Equifax and TransUnion calculate a credit rating, payment history is a defining factor. Small companies are often perceived as inherently risky, so make sure every invoice is paid on time. You’ll show lenders that your company is reliable.
- Watch your credit utilization. Don’t max out business credit cards or existing lines of credit. To build a strong rating, try to use 30 percent or less of available accounts. Otherwise, lenders may question your ability to cover outstanding debts.
- Don’t apply for credit too often. If you’re inquiring at a financial institution every other month, lenders may wonder whether your business has become overextended.
- Keep business and personal accounts separate. Open a separate bank account, use a separate credit card, and set up a separate business credit file with all three reporting agencies. Don’t allow your company to be negatively influenced by financial missteps in your personal life, or vice versa.
The post Business Credit Tips appeared first on Omlin, Gunning & Associates, P.S..
