Improving Your Small Business Credit
Many financial lenders look at the business credit score before determining if the owner should receive a loan. If your company has just opened for business, then your score may be non-existent or extremely low. You need to be proactive about increasing this score even before your business officially opens its doors. Follow these steps for improving your rating and qualifying for better interest rates in the future.
Do Not Close Accounts
You may acquire a couple company credit cards to use on business expenses. Once your business has been open for a few years, you may discover you do not need one of these cards. It will work in your best interest to keep all these cards open. Closing even one can have a negative impact on your score and decrease it substantially.
Limit Credit Usage
You may have a high maximum on a business credit card, but you do not want to spend that much every month. Even if you pay off your credit card in full every month, which you should absolutely do, you still want to maintain a low credit utilization ratio. It is recommended to keep this ratio under 30 percent. This means if you have a maximum credit card limit of $15,000, then you would only want to spend $4,500 each month.
Spend Less Than You Make
Keep an eye on how much revenue your business brings in every month. Next, you need to consider all your expenses, including labor costs, utilities and rent. Operating within your means is the best way to show lenders you can handle money. Another step to take is to pay all your bills on time. You do not want to be late on paying rent or paying your utility providers. Make sure to pay all your suppliers on time, especially if they report directly to credit bureaus.
There are free options available for checking your business credit score with the main three bureaus. These bureaus are TransUnion, Equifax and Experian. Occasionally, mistakes are made, and your rating will be lower than it should be. You do not want to discover this mistake when you go to a bank for a loan. You need to remain proactive and bring it to the attention of the bureau on your own. It may take some time for the discrepancy to be resolved, so you want to take care of it well before you require financing. Enhance your company’s credit score so that financing comes much easier to you.