Establishing and monitoring business credit can help small businesses secure loans and lines of credit with more favorable terms and rates. While establishing and monitoring such credit may seem like a daunting task, establishing one from nothing in a matter of months should prove achievable. As soon as your business is registered and has acquired its DUNS number, the next step should be acquiring a business credit card that reports directly to credit bureaus.
1. Register for a DUNS Number
DUNS numbers are an indispensable asset to businesses seeking federal funding. Their unique identifier helps grantors assess your company’s credibility and trustworthiness. An essential aspect of FDA registration, Dun & Bradstreet numbers allow your business to establish its own credit history with them and can help you qualify for loans more easily.
A DUNS number can be obtained for free; however, expedited processing options may be purchased if desired. Furthermore, business credit cards provide an easy way to start building the credit profile of your company.
2. Get a Business Credit Card
Business credit cards can help you differentiate your personal and business expenses, build your credit history, and extend cash flow. They’re especially handy if you need to make an unexpectedly large purchase quickly without waiting for payments to arrive.
Business credit cards report to credit bureaus, helping improve your scores and eligibility for loans or financing options. Some also feature rewards programs or expense management tools. If your credit is good or fair, obtaining an unsecured business card with competitive terms and rewards should not be too difficult; however, those with poorer scores may have more difficulty.
3. Make Payments on Time
An impressive business credit profile allows your company to unlock financing options that can facilitate growth. It opens doors to more favorable loan products like lines of credit and term loans.
Paying all financial obligations on time and in full is the cornerstone of business credit-building, so make sure that as you build it, you diversify your sources and keep credit utilization below 30% of the total limit (i.e., less than 30% utilization ratio). Accounts could appear on your business credit report within weeks or months—it’ll depend on when accounts become part of it!
4. Diversify your credit sources.
Establishing business credit may take some time, but with consistent effort and good financial practices in place, a robust credit profile can emerge over time. This can increase financing options as well as help negotiate favorable terms on loans or lines of credit with lenders.
One way to accelerate this process is to diversify your credit sources and maintain a low credit utilization ratio. Creditors appreciate seeing that your business has established credit histories across a range of installment and revolving credit accounts; additionally, keeping personal debt to a minimum can enhance its creditworthiness.
5. Maintain a Low Credit Utilization Ratio
Credit utilization can have a substantial effect on business credit scores, and it is vital that businesses strive to keep it at an ideal ratio. Doing so can increase scores while making qualifying for loans and business credit cards much simpler.
Credit utilization rate can be determined by totaling all balances on revolving credit accounts within your business and dividing that by their total credit limit; online calculators also make this calculation easy. The ratio can also be displayed as a percentage.
To keep your credit utilization ratio within reasonable levels, consider repaying all debt as soon as possible every month. Credit card companies report your debt and credit limit details at the end of every billing cycle; by paying early, you can help prevent high levels of utilization.
6. Keep your Business Debt to a Minimum
Maintaining an outstanding business credit profile is key if you want to maximize funding potential for your company. A strong score and history demonstrate to lenders that you are a responsible borrower capable of paying back their loans promptly.
Registering with vendors and suppliers on net terms can help your business increase its creditworthiness, with each payment going toward one of these accounts reported back to major credit bureaus.
However, it is essential that businesses maintain a balance between debt and cash on hand. Too much debt may hinder cash flow and make future financing more challenging.
7. Request a Copy of Your Credit Report
An impressive business credit profile opens doors to financing options such as loans and lines of credit that can help companies take advantage of growth opportunities or weather economic storms. Furthermore, having good credit also strengthens negotiating power with lenders and suppliers who may offer favorable terms like lower interest rates or extended repayment terms.
Checking your company’s credit reports regularly from Dun & Bradstreet, Experian, and Equifax Business will enable you to identify inaccuracies or fraudulent activity and demonstrate a commitment to sound financial stewardship. In addition, doing this may make qualifying for future loan applications or lower business insurance premiums easier.
8. Maintain Trade Lines with Vendors
Establishing a solid business credit profile can help your company qualify for more favorable terms when applying for loans, lines of credit, and vendor agreements. You can begin building it by working with vendors that report to business credit bureaus as well as using cards like the Ramp Business Card, which reports to all three major bureaus.
Make sure that you pay your accounts on time and keep the credit utilization ratio as low as possible—these strategies will accelerate the development of your company’s business credit, providing improved financing opportunities and strengthening vendor relationships.
9. Keep your company’s credit utilization ratio low.
Protecting and building a solid business credit profile requires keeping the credit utilization ratio under control. This measure measures how much of its available credit has been utilized versus its total available limit, and it plays a pivotal role in business credit scores.
Building business credit is an essential step for small business owners seeking more favorable funding conditions and rewards credit cards, but this process takes time and dedication to reap its rewards.
