Those who are starting up a new business know the importance of attracting new customers, building a great reputation, and finding the right suppliers. And most also know how difficult it is to build credit right away. Many business owners use their personal credit cards and loans against personal property, such as homes to get the funding they need to get on their feet, which can be quite risky. Instead, new businesses should quickly build up a line of credit by trying one or all of the following methods.
Build Personal Credit
Business owners themselves must have impeccable credit ratings if they want to secure a business loan or line of credit from a bank. Some simple ways to improve a credit score is to simply pay bills on time and have low card balances. Banks will be looking for credit scores of 650 or greater.
Open a Business Credit Card
Although an initial business credit card may not have a high limit, it is a great way to begin building credit. Owners should use the card at least once a month and pay off the balance regularly. After a couple years, when a bank begins to feel comfortable offering a loan to your business, a credit rating will already be in place.
Start Lines of Credit with Business Suppliers
Those who do not want a business credit card, or who are unable to open one can instead start a line of credit with a supplier. Sometimes this may be as easy as applying for a store credit card at an office supplier. For example, OfficeMax and Home Depot offer commercial credit cards that are perfect for new businesses.
Take out a Business Loan
Typically, after two years of being in business, a small business can apply for a small bank loan. Places like banks and loanbuilder.com will look at the credit-worthiness of the owner to make a decision. Most times the bank will decide on the size of loan to offer and on the repayment requirements. These loans can help a business purchase new equipment or larger amounts of supplies than they have been able to in the past and can exponentially increase the business’s annual revenue.
Business owners must be careful to guard their personal credit history by keeping their business finances separate from their personal accounts. One of the best ways is to build your startup’s own line of credit with great care. Businesses with excellent credit will find they have a great company image, and a greater ability to apply for large amounts of financing in the future.