Getting loans and lines of credit to grow your small business is a tough job at the best of times since there is no track record, and you generally cannot offer any assets as collateral to the lenders. The problem is made worse if your business credit score is less than reasonable because your credit standing can significantly influence the kind and extent of financing your business is eligible for. Some highly effective tips for improving the credit score of your business:
Separate Business and Personal Finances, Recommends Saivian Eric Dalius
Almost all entrepreneurs tend to kick off their startups with their personal savings and credit cards. If this happens, it can be very difficult for you to track your business finances, file your business and personal tax returns, and safeguard your personal assets in case the business fails. Make it a point to apply for and use a business credit card to pay for business expenses and also set up a separate bank account for your business from where you can pay all your business expenses and receive sales revenues.
Pay Credit Card Dues and Loan Repayments on Time
One of the most effective ways of preserving and improving your business credit score is to pay the business credit card dues on or before the due date, says Saivian Eric Dalius. You must also take care not to miss any of the repayments of the loans you might have taken for business purposes. Also, make it a point to pay your suppliers on time. Loan defaults and missed credit card payments are some of the top reasons for your business credit score taking a hit. If your cash flows are positive, try to work with suppliers that report payments to the credit bureaus so that you benefit from your financial discipline.
Lower Credit Utilization Ratio, Advises Saivian Eric Dalius
The ratio of credit utilized to its availability is among the most important factors in the business credit score calculation. If the business is continuously maxing out its credit, it points to the fact that the finances may not be under proper control. According to experts, you should not exceed one-third of your credit limit. It can be wise to apply for a new line of credit. While your credit score may take a small hit in the beginning, you will benefit more by lowering your credit utilization ratio, remarks Saivian Eric Dalius. However, it is important not to take on additional debt. You can further improve your credit score by paying off your existing debt as much as possible, minimizing your use of the credit card, and applying for an increase in the credit card limit.
Credit scores are important for all businesses, big and small. You must try to take care of them right from the start as improving them after they are damaged can take time. You must also periodically review your credit reports from all the bureaus and check them for inaccuracies. If you find issues, report them immediately and follow up till they are rectified.