Build Business Credit
Every business, large or small, needs to build business credit in order to build a profile that will truly appeal to lenders and big credit agencies. To build a good business credit score takes several years, if not handled by experts in the credit field. But when you do build that perfect business credit, you open the door of opportunity. Credit is capital in the business world and having a good business credit score will help you secure that much needed loan.
To build business credit that is well-established is more complicated than it sounds. The very first thing you need to understand is that it is a separate entity from your personal credit score. You must also consider that to qualify for a loan, there will be many factors that lenders will take in evaluating your loan application. When small business loan applications tripled at SBA ( Small Business Administration ) this year and loan approval had reached a stalemate, securing a credit becomes much tougher for many startups out there.
How to Build Business Credit to Get Your Loan Approved:
1. Write your business plan very well and be very detailed with the finances involved in your business operations. Be sure to list down your capacity to pay, as well as your projected earnings. For startups, make sure that you have an experience related to the new venture you want funded. Questions will be asked, so be well-prepared with your answers.
2. Know how your business credit score is computed. This will include factors like your trade experiences, payment history, credit usage, financial trends, outstanding balances, foreign exchange rates, and years in business. Make sure that your business credit report is up-to-date and error-free.
3. Start with a clean slate when it comes to your credit history. A lender will always check on your personal credit score. Call your credit bureau to send you a personal credit report. Keeping a good credit history means paying on time and having no unpaid dues. Sometimes, records are outdated and you need to have it updated with the most accurate data. Read the details very well and make sure you have the right name, social, and address on the top page.
4. Improve your business credit profile not only by paying your suppliers on time, but by not checking your profile too often. Always renew your business license on time and update your corporate books. Reputable credit bureaus like Experian will review your business credit profile once or twice a year.
5. As a basic rule, complete all the loan requirements needed before you submit your application. Make sure that everything is complete to save precious time. Many lenders will see if you have enough equity or collateral for the loan and have it prepared. If you don’t have these, find a third party who will act as a guarantor for your loan and make sure they are of good credit standing. A missing requirement may be a ground for rejection.
6. If you have extra fund to spare, hiring a firm that specializes in building your business credit score will help. Many business credit building programs will offer you a hands-free approach that helps you establish your business portfolio and trade references. There are many credit specialists to choose from and make sure they are licensed to act on your behalf.
To build business credit from scratch or dent may be the hardest thing to do. You must do an in-depth market research to know the profitability of your new venture. Those with bad credit history in the past will also struggle to have their loan given a go-signal. Always keep in mind that the success to building that ideal business credit score is a combination of proper planning, perseverance, discipline, and luck. If a lender closes its door against your loan, for some reason, don’t be afraid to try again until someone finally believes in the true potential of your business.
RESOURCES:
Experian. “ Build Business Credit: Improve Your Credit Ratings. “ 2009.
http://www.experian.com/small-business/build-business-credit.jsp?WT.srch=Y2
Flandez, Raymund. “ Small-Business Credit Sees Thaw. “ May 2009. The Wall Street Journal.
http://online.wsj.com/article/SB124148717748985859.html
Companies Incorporated. “ Business Credit. “ 2009.
http://www.companiesinc.com/business-credit/index.asp
AllBusiness.com. “ How to Build Your Business Credit Profile. “ 1999-2009.
http://www.allbusiness.com/business-finance/business-loans-business-credit/11194-1.html
