How to establish business credit
Most business owners find that it is nearly impossible to run their business without some form of credit. However, this can be difficult in the earliest stages of your business. When you are running a new business it can be difficult to get credit but you should not give up since the use of credit will be crucial for running your business. It should be stressed that establishing business credit can take a lot of time so business owners would do well to begin the process long before they actually need the credit. The good news is that there are tips that can help you to facilitate the process. Here is what you need to know about how to establish business credit-
- Make sure your business is financially healthy-The first step towards establishing business credit is to make sure that your business is financially strong. This is fairly common sense but the reality is that no one will want to give you business credit if your business is not doing well. You should also take the time to provide the necessary documentation that you will need to obtain business credit. This can start with designing a mission statement and goals for your business. You can then use these documents and turn them into a business plan that will impress potential business credit grantors. Keep in mind that any potential lender will be looking closely at your business plan to determine if your business is a good risk. You want to do all you can to position your business as the leader in your market.
- Take the time to build strong relationships-Another important step to take in establishing business credit is to make sure that you have the best relationships possible with your suppliers and other vendors. Keep in mind that these companies are going to be far more willing to extend credit to businesses that they are familiar with and feel comfortable doing so. You should also make sure that any vendor that you work with will report your credit worthiness to the appropriate credit bureaus. This is a crucial factor in helping your business to build a better rating for your business credit. Business finance experts also recommend that you try to establish relationships with multiple vendors in order to improve your business credit rating.
- Apply for business credit cards-After you have established credit with some of your suppliers then it is time to move on to obtaining business credit cards. Keep in mind that there are some lenders who may be willing to grant you a business credit card even if your business is a startup. However, you will most likely have to use a secured credit card or you will pay a much higher interest rate. This can be a good way to build business credit. A secured business credit card works on the following premise: You will deposit money into your account each month and this will be your credit limit. While this can be a slower process to establishing business credit it can be highly effective for newer businesses. Do not give into the temptation of using personal credit for your business. This is never a good idea. Business finances experts stress that you should always keep your business credit separate from your personal credit. If you end up mixing business and personal credit you are only creating financial headaches that will have to be solved at some time.You should also make sure that you are not using any more business credit then you can afford to pay off on a monthly basis.