Your credit can enable or hinder you from growing your business. A credit score is a measure of how trust worthy your are with someone else’s funds. Your business needs it’s own credit line and score. Business credit is based on your overall history of making payments and how well you use the line of credit given to you. It also includes your personal credit score. Late payments and the timing of when you opened your credit is also factored in when calculating your score.There are ways that you can improve your credit health. You can also look into funding from various sources for your business. The more credit and funding you have, the better the business.
Pay Down Debt
Once your debt is paid, you increase your credit utilization. Using less than 30 percent of your credit line will increase your score drastically. Take this advice, never ever become dependent on credit. Consider bootstrapping as much as possible to limit debt accumulation.
Ask for a Higher Credit Limit
Ask and you shall receive (if you’ve been managing your credit wisely). This task would only take ten minutes out of your life and can increase your credit score into the double digits. Your card company will ask you about your income to start the process. As a warning, sometimes asking for an increase may be seen as a hard inquiry (ouch). So take heed to the warning.
Establish a Line of Credit with Vendors and Consider Other Sources of Funding
Some manufacturers may offer you a line of credit for your products and services. These companies will do a credit check and grant you an amount that you can use. Terms of manufacturers are usually net 30, meaning you have 30 days to make your payment from the time of purchase. You can also consider other sources of funding that you may not have to pay back. There are business grants where you can apply for funding with an organization or the government. SBA .gov is a quintessential website for small business looking for funding. There is also peer to peer lending and crowdsourcing that can help you with funding.
Be a Customer at a Few Banks
Diversify your lenders. Don’t only have one bank that you work with. Have banks compete for your business. Go with the bank that offers you the best rates. If your business have good credit, bank will be calling you to offer you loans at low APR’s.
Banks Want a Track Record
Track all of your expenditures and accounts accurately. There are many software systems to make accounting seamless. The more you track the better. Banks are the least likely to loan money to new businesses due to the risk associated to new businesses. Use your business credit card and if possible, use that card for business spending only and save and organize all of your receipts. Fyi, Banks not IRS like the co mingled of your personal funds with business funds.
Enjoy credit responsibly and remember “Cash is King.”