Establish business credit

Establish business credit

As you work understand your start-up costs, you may want to ensure that your credit is in good standing. Poor or no credit history is a big reason why small businesses have difficulty securing loans. But even without loan considerations, poor credit history can also impact partner, supplier or vendor relationships, so you must take it seriously.

Here are some important factors to consider re your credit history:

Separate business and personal finances: It's essential to separate your personal finances from your business finances. Open a dedicated business bank account to handle all business transactions. This separation helps build a distinct credit profile for your business.

Build relationships with suppliers and vendors: Establish relationships with suppliers and vendors who offer credit terms. Make regular purchases from them and ensure timely payments. This helps demonstrate your business's ability to manage credit responsibly and can contribute to building a positive credit history.

Pay invoices on time: Timely payment of invoices is crucial for establishing good business credit. Do your best to always pay your bills on or before the due date. Consistently meeting payment obligations builds trust with creditors and positively impacts your creditworthiness.

Maintain good financial records: Maintain accurate and up-to-date financial records for your business. This includes keeping track of income, expenses, and financial statements. Having well-organized financial records demonstrates your business's financial stability and can be helpful when applying for credit.

Explore trade credit options: Look for opportunities to establish trade credit with suppliers or vendors. Trade credit allows you to obtain goods or services on credit terms and pay for them at a later date. Regular and responsible use of trade credit can help build your business credit profile.

Seek credit from financial institutions: Once your business has a solid credit history, consider applying for credit from financial institutions such as banks or credit unions. This can include business loans, lines of credit, or business credit cards. Research the options available in your country and evaluate the terms and conditions that best suit your needs. Remember, credit is best when your business enters the growth stage. Seeking/obtaining loans too early on is not always advisable. 

Maintain responsible credit management: Continuously manage your business credit responsibly. Make payments on time, avoid taking on excessive debt, and keep your credit utilization in check. Responsible credit management is crucial for maintaining and improving your business credit-worthiness over time.