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How to Build Business Credit, and Why You Need It

Are you a new business owner who has yet to establish business credit? If so, don’t worry! Yes, it can take some time to build a stellar credit score. But it is possible to build both a successful business and business credit at the same time. The following tips and information will help you get started.

What is Business Credit, and Why Do You Need It?

Essentially, business credit is a financial tool. It allows your business to access loans and other forms of financing, qualify for better terms from vendors and build good relationships with other business-to-business (B2B) sellers. It can also be used as a bargaining or negotiation tool when in discussions with other businesses over prices and services. In short, it is a major indicator of just how healthy and stable your business is financially.

How Bad Credit Hurts Your Business’ Future

Did you know 82% of small business owners are completely unaware of how to interpret their business credit score? Many others don’t even realize there is a difference between a personal and business credit score. A lack of understanding can seriously hurt your business’ progress and success. Bad credit can impact your ability to secure financing, credit cards and other types of financing. This will make it incredibly difficult to fund expansion, boost cash flow and keep up with rapid growth.

Steps to Building Business Credit

Here are a few steps that will help you get on track to building strong business credit:

  •       Legally create and register your business

The first step is to make sure your business is established legally as either a sole proprietorship, corporation, partnership, or limited liability company. Create a legal name and register your business with your secretary of state.

  •       Get an EIN and business bank account

Next, you will need an EIN or employer identification number. This number is what the government uses to identify your business; it is also used when paying your business taxes throughout the year. This number also allows you to file taxes, open a business bank account and apply for business licenses.

  •       Build strong relationships with vendors

Each time you pay on time, or even early, with vendors, you are building business credit. While not all do, some of your vendors likely report directly to credit agencies. So as you grow your business, be sure to create strong relationships with your vendors.

  •       Pay early and often

In truth, one of the most powerful things you can do for your business is to simply pay your bills. Pay your bills fully and on time, every time. This is the easiest, fastest and simplest way to build stellar business credit. You can also use a business credit card to build credit by using it each month and then turning around and paying it off.

Top Benefits of Building Business Credit

There are so many benefits to building good business credit:

  • When and if you need extra capital, securing financing will not only be easier but cheaper as well.
  • If you have built a solid business credit score, vendors and service providers may not require you to prepay for the certain B2B products and services you need.
  • You may also be able to get your suppliers and financial lenders to agree to better terms: lower prices, extended contract lengths, lower interest rates, etc.
  • Overall, your business will be more financially stable and be in a position to take risks and seize opportunities to expand.

Where to Find Merchant Services with Bad Credit

Do you need help building strong business credit? Has a bad credit score been holding you back? The team at First American Merchant offer you step-by-step straightforward deals to help with any merchant account issues. First American Merchant continues to lead merchant accounts to recovery, build business credit and thrive.