Building your business’ credit score can involve a variety of different steps according to The Really Useful Information Company (TRUiC) – which provides bespoke guides to virtually anything “business” related.
Below, we’ll explore the three most important steps you need to take if you’re looking to improve your business credit score the easy and simple way.
Step 1: Make sure you set up your business correctly
This is the first and one of the most important steps you can take to improve your business credit rating. According to TRUiC, this is to ensure that you have properly set up your business by meeting all applicable legal requirements.
Use the right business structure
Choosing the right business structure can go a long way in ensuring that your business radiates some element of credibility and reliability. According to TRUiC, your best option here is to incorporate your business by registering it as a limited liability company or a corporation.
The business credit score cannot be improved if you work as a sole proprietorship because your personal and business finances are not legally distinguished as two separate entities.
Get an Employer Identification Number (EIN)
After you have successfully registered your business (taking into account your most favorable business entity structure), you will need to create an Employer Identification Number (known as an EIN).
It should be noted that your business will need to meet a plethora of legal prerequisites in order to be eligible for an EIN, including being incorporated.
Create a business bank account
Setting up a business bank account was one of the most fundamental points raised in TRUiC’s guide on how to set up business credit. Indeed, having a business checking account will: a) provide you with a plethora of financial benefits (such as loans), and b) improve your financial organization by separating your personal and non-personal finances.
Get a business phone line
Although this point may seem less important when talking about business credit, TRUiC has highlighted its importance in relation to how lenders will view your business, and therefore how they will decide whether or not to extend your business credit. .
Get a business website
Getting a business website can help improve your business credit in the same way as getting a business phone line. Overall, it will act as an active representation of your business image and also provide crucial information that lenders will rely on to verify your personal information and history.
Step 2: Create a business credit history
This is a crucial step, which can actually indirectly handicap various business owners. Indeed, to have good commercial credit, you must have allocated enough time to build it.
Pay all bills and lines of credit on time
Paying all your bills and lines of credit on time (or sooner, if financially feasible) is undoubtedly one of the simplest, easiest and most effective ways for you to establish and maintain a good credit score. commercial according to TRUiC.
To ensure you never inadvertently miss a business payment, you should take steps to: a) set up reminders through your company’s calendar apps (such as Google or Microsoft), and b) always prioritize your invoices by order of importance.
Set up Net-30 accounts
Net-30 accounts allow businesses to pay for any professional product or service they need up to 30 days after purchasing it.
In addition to the obvious general cash flow benefits that businesses can enjoy with a Net-30 account, properly repaying these payments on time can go a long way towards a business’s successful credit history, because these suppliers report directly to the United States. credit bureaus.
Step 3: Know what to avoid when building up business credit
Avoid predatory lenders
While these may seem harmless at first, TRUiC’s industry analysis has revealed that, in fact, these predatory lenders are becoming increasingly “sneaky”, offering exorbitant loans coupled with high interest rates. very high daily charges which, in pragmatic terms, allow them to be repaid on time. almost impossible.
Have outdated business information
Failing to properly update your business information is one of the easiest and most careless ways to damage your business credit rating; indeed, it can indirectly affect a plethora of milestones mentioned above.
Above, we’ve outlined the most important steps business owners can take in order to properly ‘fix’ their business credit score according to TRUiC’s team of experts.
If you’re still looking for a “guiding map” in this area, take a look at TRUiC’s recent Obsidian Bear Funding review; this can be particularly attractive to proactive small business owners with future expansion plans that will undoubtedly require external funding.