There are four credit bureaus that provide an individual’s credit score and credit rating. Just as we have personal credit score, there is separate credit rating for all business credit. To avail a business loan, the creditworthiness of the business is checked by the business credit health.
Building business credit is similar to building a personal credit health. The business credit report can be availed for companies that have outstanding loans or have availed credit in the past. Before understanding the ways to build the business credit, let us first know about what a business credit report is and from where can you get it.
Getting Your Business Credit Report
A business credit report or company credit report in India is provided by credit rating agencies like CRISIL, CARE, ICRA, SMERA, ONICRA, Experian etc. A business credit report offers information related to nature of business, address, partners, holding companies, past credit enquiries and type of credit facilities availed till date.
Ways to Build Your Business Credit
Having a good business credit is essential to avail credit for working capital, expand the business purchase of inventory etc. at better terms. Moreover, good credit builds the company’s reputation and improves the business as well. You can adopt the following methods to build a good and strong business credit.
Do Not Mix Your Personal Credit with the Business Credit:
You might tend to use your personal credit card for business purposes. Initially, you may not understand the importance of getting a separate credit for business purposes. But later you will realise that it will make it difficult for you to manage the business and personal expenses. By getting a business credit, you can keep track of your expenses and start building a solid business credit health. It will hep you get higher credit in the future at better terms.
Maintain Good Credit Habits:
Pay your loan EMIs on-time and maintain a good credit utilisation on your business credit cards. Any default on your payment could damage the credit score which will make it difficult for you get credit in the future.
Get a Business Credit Card:
You may have started your business with a fund obtained from your parents or out of your own money. But it is important to build a business credit history. You can get a business credit card to begin your business credit journey. Credit cards can be handy to manage your expenses related to travel, purchases etc. and with reward points and cashback, you can save as you spend. Add-on credit cards can be used by your employees to facilitate speedy financial transactions.
How to Protect Your Business Credit
The credit rating agencies, apart from giving you the business credit score and report, also offers monitoring services to the companies. It may include reviewing the company’s credit profile for completeness and accuracy, developing strategy to improve the business credit, preventing identity theft, providing information about who is enquiring about your business etc. You can subscribe for the services and protect your company’s credit.
The lenders will look (through a customer’s credit profile) stability and earning potential of your business when you apply for a credit. As you aim to build your business, a positive credit will reflect positive changes upon your company.