Building a Healthy Business Credit Score
Your credit score is the key to accessing the resources your company needs when you’re building a new company into its ideal form for long-term growth. Unfortunately, it’s also a very opaque number, and understanding how to build it up is difficult. Since you don’t know exactly what makes it rise and fall and how much each action you take will impact it, you can only aim at behaviors shown to build that score up over time. That means accepting your work on your credit numbers will always be a long-term commitment, one you can’t afford to lose sight of if your company is going to flourish.
Another important thing to remember is that a lower score does not mean you can’t access credit, it just makes doing so more expensive. One of the key ways to build your credit is by accessing the credit available to people with your score and then successfully managing it. The question is, what credit is available? Loans are usually believed to be the fastest way to build a score, but secured business loans are typically only offered to companies with at least two years of operating history. You could go for an SBA loan if you have a need that fits the bill, but a faster and more accessible solution is to take out a business credit card or credit line.
If you are running a sole proprietorship or business partnership and not an LLC or corporation, you’ll also want to work on your personal credit score by paying down credit lines and taking care of any delinquent debt. Your personal and business scores are not the same, but until your business has established a credit history of its own, your personal score will have a big impact on its ability to access credit.
On top of accessing credit resources like business credit cards, you can also build your score by asking your vendors and suppliers, including your utility companies, to report your payment activity. They usually aren’t reporters, but anyone who is a creditor can report, so every time you pay an invoice for services already delivered, that does qualify as an event that could impact your credit if it was reported. Not all your vendors will agree to report for you, but some will, and it never hurts to ask, especially since they only need to do it until you get the credit score you need. Then, when you’re accessing and managing credit resources, your score will maintain through that activity.
