A business credit score is built on data that pertains to your financial history. Business financial history could include various lines of credit, length of credit history, payment history of business credit, loans undertaken by business, length of credit, and the purpose for which you are using your loan.
Here Are Some Ways To Build A Decent Business Credit Score
Do Not Mix Business With Self
For sole proprietorships and general partnerships, the business is deemed the same as the owner. This means that your personal credit score is taken into account for all financial matters. So, it is important to legally separate a business from the owner and also build a separate business credit score.
Have An Address And Phone Line Dedicated To Business
Establishing a dedicated business address and phone number will assert your business’s separate existence. This will reflect with credit agencies also and will help you establish a separate credit score for business.
Open A Business Bank Account
Carry out all the business transactions and dealings from a current account opened in the name of your business. Business credit bureaus will track your business transactions and include the details on your business credit report.
Borrow from Lenders Who Report to the Business Credit Bureaus
The above steps will ensure that you build a good credit score. But, It is important that your creditworthiness gets recognized by business credit bureaus. So, it is ideal to borrow from lenders who report your conduct to one of the business credit information companies in India.
Use Your Business Credit Card
Open a business credit card and use it each month once your business account is established and your business has started operating. Opening, using, and paying your business credit card bills will help in building a great business credit score. Compare various lenders and business credit cards and choose the most suitable business credit card for you. Some cards may offer rewards that can be beneficial for certain types of businesses. One thing to keep in mind is that if you have just started your business, your credit limit might be rather low. As you build your credit score, the limit will increase.
Continue Building Relationships With Vendors
As you build your business, continue building relationships with vendors. Create business contracts with them. Choose carefully those vendors who report to credit agencies since all of them don’t. Also, do not choose vendors who report to the same credit agency. Choose vendors who report to various credit bureaus. Paying early and timely with vendors that report to credit agencies will help in building your business credit score.
Keep Track Of Your Business Credit Score
As you start building a business credit history, you should also check your business credit reports periodically as you do your personal credit reports. You can do a free business credit score check and download your business credit report at Creditmantri.
Have Responsible Financial Habits
It is essential to borrow diligently. This means that you should draw your credit from a mix of credit accounts. Timely payment of bills and in full will help in building your credit score. Paying your bills early is even better since you can build your credit score even faster. Having financial discipline is very good for a business credit score.
Advantages Of Having A Good Business Credit Score
Easy Approval For Credit
When you have a good business credit score, lenders feel more confident in lending to you. So, not only will you qualify easily for loans but also will get lower interest rates on loans. Having a good business credit score will help especially when you borrow from traditional lending institutions such as banks.
Loans And Contracts With Better Terms
When you have a very good credit score, you will be able to get better terms on your loans and business contracts. You can negotiate with vendors and suppliers to lower prices, extend the length of contracts, and lower interest rates.
Safeguards Your Personal Finance
Your enterprise’s debts will be reported on your company’s credit report. This protects your personal credit score and report to be affected by your company’s financial problems When you have a business credit score, it may limit your personal finances from getting exposed to business ventures. But, lenders may look at your personal score to check your credit responsibilities when applying for a business loan.
Will Give Your Business Financial Stability
Long term success in business depends on establishing a conservative financial base and taking risks when new expansion is necessary. To build a good credit score and maintain it, you should practice financial discipline. This means that you will be saving money, planning your financial future, and creating a stable and sustainable company.
Having and maintaining a good business credit score will make your business financially stable.
Conclusion
Building and maintaining a good business credit score will be highly favorable to your business. You can get easy and low-interest business loans and bag contracts at lower prices. You can not only build good relationships with banks, lenders, suppliers, customers, etc but also build a good financial reputation for your company with a good credit score. You can Check your credit score from time to time with credit bureaus. Do a free business credit score check on CreditMantri.
FAQS of Build A Business Credit Score from Scratch for A New Business
1:What is the difference between a personal credit score and a business credit score?
A personal credit score is used to check your personal creditworthiness. Whereas, a business credit score indicates whether your company is in a good position to take a loan. Personal credit scores are not publicly available whereas business credit scores can be looked up by anybody from the reporting agency.
2:What are some of the red flags in your business credit report?
Some of the red flags are, high credit utilization, negative consumer reviews, loan defaults, bounced cheques, and negative cash flows.