A Business Must Have Corporate Credit Ratings Separate From Personal Credit In Order To Grow

Introduction

Small businesses make up a large part of the business market. There are estimated to be almost 30 million small business in the United States alone, and these business employ over half of the private sector work force. With all of the competition of small businesses, not to mention the chain giants, it can be difficult to obtain the loan you need for that new storefront or equipment purchase. Out of all small businesses, almost as many close per year as open. Building your corporate credit so that you can qualify for loans doesn't have to be impossible, but there are some key strategies to keep in mind. Follow these five key strategies to start, develop, and continue to build and improve your small business credit ratings and you'll soon have the credit lines you need for more substantial loans.

Strategy 1: Separate Personal and Business Credit

The first essential step is to separate personal credit from business credit. While it's important to have your own personal credit, it is equally important to have business credit and to never mix the two. If your business credit remains linked to your personal credit the two will always be connected, and this can harm either your personal credit or your business credit. Establishing your business with its own credit is essential to building your small business. The first step is to open your own business account so that your credit will remain separate. This first step is important for all small businesses and it helps to get a business account at the initial opening of your small business. It is also necessary to make sure that your creditor reports the history of your payment to business credit agencies.

Strategy 2: Register Your Small Business

In order to use any business credit you may obtain, it is essential to first register your business so that it is recognized as a small business. Look for vendors and creditors who are already willing to extend a line of credit to you, and avoid those who ask for a personal guarantee check, as this mixes your business credit with your personal credit. If your business credit is linked to your personal credit in this way it can lead to liens being placed on your own personal property in order to cover a business debt. When you are initially starting out having a dedicated business-only phone line can help to establish your identity as a small business. There are also other requirements you will need to register your business and develop your business's identity. Once your small business is registered you can take advantage of your business credit. Select vendors and creditors who will report your actions to national reporting agencies. Not all lenders do this, so you will need to personally check that this will be done by the lender or creditor that you select.

Strategy 3: Build Credit Scores

It is important to have good corporate credit ratings with the three key national reporting agencies: Experian, Equifax and Dun and Bradstreet. These will be three separate scores and they must all be of good rating. You will have to start out small and gradually build your corporate credit ratings, eventually adding on more credit lines and expanding your credit availability. While doing this, it is essential to pay all bills on time and to be up-to-date with any payments that need to be made. Just as with your personal credit, business credit hinges on prompt payment. One step that can lead to good credit is to have credit cards expressly for your business and unconnected with your personal credit. Procuring business credit cards is another important step and usually it is best to have three of them. It is essential that none of these cards be linked to your personal credit. Additionally, you will need to verify that these credit card transactions and their payment histories are also being reported to business credit agencies.

Strategy 4: Manage Your Accounts

Maintaining your accounts and keeping your business credit in good standing is a key concept for any small business. Keeping your purchases low (below %20 of your credit offered) will help keep you in good standing. If you have a $20,000 credit line, try not to put more than $4,000 on your card at any one time. Keeping the amount low will help improve your credit card scores. Additionally, paying your creditors on time or even before the bills are due will help improve your relationship with these creditors and vendors, making them more likely to provide positive feedback for your small business when reporting to credit reporting agencies. Again, it is important to verify that the vendors and creditors you select will be reporting all of your transactions and your account histories to the key credit reporting agencies. If actions are not reported you will not be able to receive any benefit from paying on time and keeping your business accounts well-maintained.

Strategy 5: Avoid Inquiries

Inquiries into your corporate credit ratings can have a detrimental effect on your credit, so avoid excessive inquiries into your ratings. Make it a habit to only look if it is absolutely essential. Your corporate credit ratings will vary anyway, as not all business account actions are reported by all lenders and creditors. What is important is to maintain healthy procedures for all credit actions. If you work to maintain good standing with all of your creditors and vendors you do not need to worry about personally knowing your credit ratings.