Companies with strong business credit files can reap many benefits, because they are able to convey a good reputation. For small businesses and startups, establishing a reputation can be an onerous task, but with a strong business credit file, many problems can be solved at once. Besides helping to establish a reputation, building a business credit file can aid funding and contracting efforts, as well as help manage business risk and cash flow.
Adhering to a good credit-building strategy can play a huge role in how your business is perceived by other industry professionals and corporate peers. Relationships are the key to growing your business.
Get started with these tips for building a strong business credit file and reputation.
Key Components of a Good Credit-Building Strategy
- Consistent Business Identity
If you want your business to be viewed as a professional entity, you should create a consistent identity. This means using the same business name, address, and phone number on all your correspondence, invoicing, and marketing materials. Doing so will also help separate your personal identity from your business identity and help the business credit bureaus keep more accurate files on your company.
2. Obtain a D-U-N-S Number
When a business owner or stakeholder checks another company’s credit profile, they do so using that company’s D-U-N-S® Number. If your business does not have one, other professionals may not view your business as legitimate until it does. There are companies that don’t just wait for potential clients to look for their D-U-N-S® Number, but actively promote it. That is how they show they are reliable and have solid credit scores.
3. Low Credit Balances and On-Time Payments
Paying bills on time can be the cornerstone of building good business credit. Keeping your business credit balances low or paid off can also have a major impact on the quality of your business credit scores. Ideally, your balance should not exceed 25 percent of your credit limit, even if you pay your balance off at the end of every month. Staying below that threshold could help improve your credit, and more companies may be willing to work with you if you show a history of conservative borrowing.
- Credit Monitoring Tools
Because your business credit rating can change overnight, it’s important for you to keep track of these changes, so you can take the appropriate action if anything is amiss. Free business credit monitoring tools can notify you automatically when your scores and ratings change.
5. A Diverse Business Credit Report
Once your business credit is established, you should start working on expanding your profile to include credit accounts from various types of lenders. For instance, most businesses start off with a personally guaranteed business credit card and vendor lines of credit. After making timely payments on these accounts for a period of time, business owners may then try to get approved for a business credit card based solely on the business’s credit or they may apply for a small business line of credit at their bank. The more diverse your business’s credit file is, the better its credit score can be.
Building your business credit file is no small task, but the positive impact it can have on your company’s reputation cannot be understated. As your business grows and you begin to approach new challenges, such as getting a loan or securing a large contract, you’ll be glad you’ve already taken the time to establish your business credit and your reputation.