How to build up your small business credit score

What is business credit?

Everyone knows about how their personal credit score can affect their life and having a poor rating can make it harder, if not impossible to open a bank account, get a store card, apply for a loan or mortgage, and more.

A business is no different. Your business score basically demonstrates to lenders, banks, and vendors how healthy your business really is.

Why do you need a good business credit rating?

All small businesses need to build up their business credit rating over time.

Having a good credit score makes it much easier to obtain a loan, access a credit facility you might need to tap into during your expansion period or during a slow month. A great credit score also helps you get a better borrowing rate and may help you get better terms from your vendors.

The basic benefits of having a good having a good business credit score

1. Cheaper finance

Not only can you apply and be accepted for a business loan, but you will get that loan at a cheaper rate. Over time your bank or lending provider will also increase your lending limit allowing you to access more at a cheaper rate when the need arises.

2. You can eliminate prepayments

Many new businesses have no business credit score and so they will need to pay upfront for everything. You will have to pay for products upfront and then hope to sell enough products to simply buy more stock in. This may cripple and stifle your business’s ability to provide a wider range of products in the early days and if you have poor credit you could find this continuing. Once you have a good relationship with your vendors and bank, running your business’s finances can become a lot less arduous.

3. Long term financial stability

A good business credit score means your business is becoming stable. You are seen as a good bet by your bank, lender, and suppliers.

Long-term business success often hangs on building and demonstrating finical responsibility. This will help your employees know that their jobs are safe and they will work harder for you. A stable and solid credit rating means you know how to budget your business, save money for a rainy day, expansion, or a sudden unforeseen expense.

Now you need to know how to build a great business credit score.

1. Establish your business entity

The very first step is to establish your business legally. This might mean as a sole trader, a partnership, or as a limited company. You will need to register this entity with the appropriate governmental departments.

Create a name and an establishment (office address) to work in. Remember to pay your rent and bills on time

2. Get an accountant and register with your government tax office

You will need your company ID and tax number to open up a business bank account and apply for any business licenses you need.

3. Open a business bank account

You will need this to run your business. You will need an account to receive income into and also pay your vendors, business expenses and wages. You will also need to start building up a solid relationship with your bank that can become mutually beneficial down the line.

4. Build a relationship with your vendors

As you deal with new vendors ensure you pay them on time, or early to establish a great relationship with them. Vendors report back to credit rating agencies.

5. Use your business card carefully

This is one of the best ways to build up your business credit score. Actively use your business card and ensure that you pay it off on time each month and do not go above your credit limit. It is generally recommended that you use no more than 30% of your total credit limit.

In the beginning, your credit limit will be rather low, over time if you are showing good money management you will find your credit limit being raised.

6. Increase your credit rating faster

Paying your bills on time and in full will really help your credit score.

Paying your bills and vendors early and often may actually help build up your credit score slightly faster.


How to maintain your business credit

It takes hard work and good financial management to build up a great business credit score.

You do not want to jeopardise or do anything that could bring that score down and hinder parts of your business operations.

We suggest working hard on building up your score and keep an eye on what your score is from time to time.

We wish you the best of luck with your business journey and we also hope that you have enjoyed reading this article and found it helpful. We would be very grateful if you would kindly share this amongst your friends. Thank you.


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