Many small and medium-sized businesses are hard-pressed to find working capital to help their ventures grow because of insufficient financial history. This poses a challenge because the majority of traditional lenders look into this before approving a loan. With that said, finding ways to build business credit fast is a common quest among new and existing entrepreneurs.
Establishing your business profile early on can make your short-term and long-term plans a reality. Even if financing is not on your radar for now, preparing for a possible major capital expense or expansion in the future will be beneficial. It’s best to start learning how to improve your business credit score now so you are ready for anything.
What is a Business Credit Score?
A business credit score reflects your business’ health and creditworthiness in the eyes of lenders. They are different from your personal credit score and are evaluated separately whenever you apply for financing.
For more established businesses, lenders typically look at only the company’s credit history to assess readiness for a loan or a lease. With a small business or startup, however, since there is limited credit history for the business itself, the owner’s personal credit report will also be taken into consideration.
Business credit scores range from zero to 100, with most lending agencies requiring at least 75, while personal credit scores range from 300 to 850, with most lenders requiring a minimum score of 600 for a loan.
How To Increase Business Credit
There are immediate and long-term ways you can boost your business credit. We talk about some of them below.
Ways To Build Business Credit Fast
Want to know how to improve your business credit score? Here are immediate solutions.
1. Get an Employer Identification Number (EIN).
The first thing you should get once you start a business is an EIN. This number is used to fill out W-9 forms and file tax returns and is a great way to build business credit fast as it helps legitimize your operations. You might also need to secure one to qualify for business contracts and open a bank account under your company’s name. The application process is fairly simple and can be done online via the Internal Revenue Service (IRS) website.
2. Open a business credit card.
Opening a credit card in your company’s name is another way to build business credit fast. By purchasing equipment or supplies using your card and then ensuring that payments are made in full and on time, you demonstrate your capacity to handle finances responsibly. Be careful not to overextend your credit or make purchases you don’t really need. Credit may be available on your card but that does not mean you should use all of it.
3. Secure small business loans and financing.
Small to medium-sized businesses can build credit scores fast by taking out small financing loans from reputable lenders that report to major credit reporting agencies — and making sure payments are made early or on time. If you’re trying to build credit in anticipation of an expansion, there’s no better time than now to start ramping up your score through loans for small businesses.
LendThrive, for example, can provide direct financing assistance of up to $150,000 within 24 hours and with fixed and affordable interest rates. It also offers incentives for early and on-time payments via the Rate Reduction Rewards program, which not only puts more money into your bottom line but also helps establish your creditworthiness.
4. Get incorporated.
You should consider forming an LLC or a corporation to separate your personal and business credit profile and financial records. If you continue to operate as a sole proprietor, your personal credit will always be enmeshed with your business profile during evaluations. Keeping your business records independent from your personal activities is one way to build business credit fast.
Long-Term Strategies for Building Business Credit
Aside from short-term solutions, it’s also important to build a lasting business credit score.
1. Pay on time all the time.
The best and lasting way to build a great business credit score is to ensure that all your payments are on time. This can take a few years to establish but will be worth the effort when the time to secure a large loan comes. Start with financing programs and apply for small business loans to purchase equipment, furniture, supplies, etc. Keep your credit card clean and bills paid off without pending balances. Some lenders, like LendThrive, offer reduced rates for on-time payments via its Rate Reduction Plan.
2. Maintain good credit with your vendors and suppliers.
Your suppliers’ and vendors’ experience transacting with you adds brownie points to your business credit rating. If you have a good relationship with your suppliers, the more likely they are to allow payment terms for orders and not require you to always pay upfront. Having net-60 or net-90 terms with suppliers that report to business credit reporting agencies will help place you in a positive light and boost your business credit rating down the line.
3. Separate personal and business expenses.
It’s important to keep emphasizing this, if you want to build business credit for the long term. All transactions for your business should be made under the company’s name. Not only will this make things easier for future lenders to evaluate you but also takes the headache out of having to figure out which expenses are allocated to your business when tax filing season comes.
Want To Build Business Credit Fast? Start With LendThrive
As mentioned, small business financing is a great way to build your business credit rating, especially if you are a newer company with limited financial history. Securing a loan with LendThrive is quick and easy, with approvals given in as fast as 15 minutes and loan proceeds released within 24 hours. There’s also no penalty for early repayment.
If you want to improve your business credit score fast, get in touch with the knowledgeable staff at LendThrive for a free consultation and to learn more about the different financing programs available.