Building Good Business Credit
In order to build your business and help it grow, you need capital. One source of capital for business purposes is business loans. In order to be eligible for a business loan you have to satisfy the lending financial institution that you they are not taking a risk by extending you a loan and that you will be able to payoff the loan amount in a timely manner.
One of the primary sources that the lending institutions use to gauge whether you are a safe or risky candidate for giving out a loan is your business credit report. A good business credit rating will go a long way in giving the lender the confidence in you, and your receiving the loan you desire to further your business. For this reason, it is imperative to build good business credit scores so you can get the financial help your business needs in order to grow.
Small companies today are trying their best to prove their lot to the lenders so they can receive loans for various purposes, ranging from purchasing additional inventory, to keep up with customer demands, and enhancements to the business.
In order to get your business registered to begin the business credit report, you have to either incorporate your business or turn it into an LLC. Once you have done this, you will have to provide the paperwork required by lenders. This could include your licenses and business permits, various contracts signed with buyers, suppliers, and other relevant entities, reference documents, financial statements, etc. Also, while registering your business, you will need to provide a permanent address and have a phone number where you can be contacted. You cannot provide a P O Box as an address.
Next, you should register your business with a credit agency, which will check your credit related activities. These activities will be translating into your business credit ratings and your credit scores. These credit agencies will serve as your reference when applying for financial loans and get your business credit report to qualify for the loan. Your business credit ratings will be dependent on your business's financial stability. This will in turn depend on the financial documents you will be creating and using while you are operating your business.
There is one definite way by which you can improve your credit ratings. If you stay prompt and diligent in making your payments, this will ensure that your credit rating stays good and clear. If you are delayed in making the payments, this will reflect negatively on your credit report and be a possible cause of much heartache when your business is in need of money.
So, do everything in your means to stay ahead of the payment deadlines. Also, ensure that you know your credit scores and ratings. Monitor the credit reports you receive. Ensure that the transactions in the report were conducted by you and are accurate. Keeping these checks will go a long way in keeping your credit report clean and favorable for financial loans.
Small businesses are increasingly using business credit cards in order to improve their credit ratings. There are business credit cards available with financial institutions that have reduced APR and interest rates. These make it easy to make regular payments and thus have an opportunity of building a good credit report. Business credit cards also do not have any attached principal amounts. This can help keep the interest expense per month under check. Additionally, planning out the business budget is crucial to keeping expenses under check while maximizing profit, and not having to worry about accruing interests.