As small business owners, many entrepreneurs may find it difficult to establish business credit and often have to rely on their personal credit history to get their business up and running. As soon as you decide to go forward with your business, there are a few steps you can take to start developing your business credit profile, which can help you negotiate better rates when financing with your vendors and suppliers.
1. First, if you have been operating for awhile, determine if you have a business credit profile. Check with D & B (Dun & Bradstreet) to see if they have an online file for your business. D & B is the leader in business credit reporting. If you do have a file available, review all the information to be certain it is accurate, just as you would your personal credit report. If they don’t have a file for your business, request a DUNS number and start building your business profile.
2. Add to your business credit profile by establishing your business checking account at a financial institution that understands the needs of small business owners. Compare rates and fees for maintaining accounts with the services that best suit your needs. Fees for simple actions such as the number of checks written or amount of cash deposited per month can vary from bank to bank and ultimately impact your bottom line. Look into whether you qualify for membership with a local credit union; they often have lower rates on many widely available services. Establish your utility services in your business name and pay for those services with your business checking account.
3. Be sure to pay your bills, especially your rent/mortgage on time. Your credit rating is determined by many factors, but paying bills on time is one of the top factors. Also, don’t over extend yourself with credit and keep your debt to cash ratio in mind. Also, get to know the credit history of your customers so you won’t jeopardize paying your bills on time because of slow paying customers.
Starting with these few simple steps can help you better manage your credit, which may affect your interest rates on everything from business lines of credit, equipment leasing, insurance premiums and even merchant cash advances. Invest some time in understanding what your credit is saying about your ability to do business, today and for many years to come.