8 Approaches to Expand Your Small Business Credit

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8 Approaches to Expand Your Small Business Credit

Getting a business loan takes time, and establishing good business credit takes time. While it may be difficult to start building your business’s credit, it can impact your success. Here are 6 approaches to expanding your business credit. These tips will boost your business’s credit rating and increase borrowing power.

Paying off the balance and reusing credit facility boosts business credit rating

Your business credit score will impact your credit. Applying for a credit card for your business will result in a hard credit inquiry. In addition, when you apply for additional small-business loans and credit cards, lenders may continue to conduct such inquiries. Consequently, responsibly using your business credit card will help boost your credit score.

Business structure

The first step in building business credit is to set up your company’s legal structure. Whether you choose a sole proprietorship, limited liability company, or corporation, these forms will establish your business’s credibility with vendors and the government. They will also help you open up business accounts and make your business known to credit reporting agencies.

Open business’s bank account

Once you have established your business’s bank account, you can apply for a business credit card and use it for everyday expenses. Some cards may even offer rewards, which can be beneficial for certain types of businesses. Although business credit card limits can be low when you start, they will increase over time. Once your business’s credit score has reached a certain level, you can apply for a larger credit limit. It will take time to build up business credit.

Paying suppliers on time boosts business credit rating

One of the best ways to raise your business’ credit rating is by paying your suppliers on time. Even if your suppliers don’t report their payment history to credit agencies, establishing a credit account with them will help your rating. While not all suppliers register positive payment histories, you can request that yours does or manually add these trade references to your credit file.

Paying bills on time

If you’re a small business owner, one of the best ways to expand your business’s credit is to pay your bills on time. Potential lenders and creditors may request a copy of your business’s credit report. A creditor who knows you can’t pay your bills on time may decide against lending you money or extending you credit. On the other hand, a business with good credit can qualify for preferential loan rates and more favorable terms from vendors.

Secured cards

You may consider applying for secured cards if you own a small business. While unsecured cards require no collateral, they have higher credit limits and reward programs. This option is often more challenging to qualify for, and business owners should consider the pros and cons of each before applying for one. Whether you use a secured or unsecured card, follow the guidelines and make all payments on time to avoid any problems with your credit score. 

Some credit card issuers may require you to apply for a personal credit check before applying for a business card. However, you can check your credit report for free with Credit Sesame. The service also offers an option to receive alerts about changes in your credit score. Credit Sesame sends emails when you see new debt products or changes in your credit usage.

Corporate credit cards

You have a few options if you’re looking for a corporate credit card for your small business. You can choose from a corporate Visa or MasterCard or one of the many credit card issuers issued by large credit card issuers. These include American Express, Capital One, Citi, Chase, and Wells Fargo. While these credit card companies may not be able to offer you a corporate card, they can provide you with one if you qualify.

Lines of credit

Small businesses can benefit from a line of credit for many reasons. They can use it to fund payroll invoices or unexpected expenses. These loans have specific terms and repayment amounts, some revolving, meaning you can use them whenever necessary. However, a business line of credit could be the perfect solution if you need extra money quickly.

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