How to Build a Business Credit Profile

Building a strong business credit profile gives you a chance to open up attractive lines of credit to help fund your business. Business credit allows you to lease equipment, purchase inventory, hire staff and also gives well-established businesses a reason to do business with you. Proving that you are able to pay your bills on time increases your chances of obtaining more credit and establishing strong business partnerships for the long-term. Your business credit profile represents the key data points that determine your creditworthiness.

Difficulty: Moderate

Instructions

Things You'll Need:

• Internet access
• Telephone
• Your business plan

1. Make sure your business is established under the right structure. In order to start building your business credit profile, you'll need to own a Limited Liability Company (LLC) or a Corporation.

2. Update your business plan. Making sure your business plan contains all of the financial goals and details for funding will help you when approaching creditors and lenders. Update your business plan's financial section to include as many details as possible, including any licenses and permits that keep your business operations running.

3. Apply for a loan through the Small Business Administration (SBA). This is a valuable resource for building a credit line from the ground up; as long as you make payments on time, you will build an attractive business credit profile (see Resources below).

4. Obtain financial backing from an angel investor. Independent investors can help you build your business credit profile much more quickly than other methods; you may need to prepare and customize your business plan for each investor that you approach.

5. Apply for business credit cards. Apply for only one or two business credit card accounts and maintain a low balance. This will help you increase your credit score as you establish creditworthiness.

6. Review your credit profiles. Contact credit bureaus such as Experian to obtain your business credit report and check for any errors or omissions (see Resources below). This is the information that will be shared with vendors and even prospective business clients.

Tips & Warnings

• Having strong credit also allows you to keep cash on hand for managing business operations.
• Keeping your business credit profile in good standing can open up new opportunities.
• Keep your financial records up to date so that applying for more credit becomes easier.
• Vendors and other businesses can review your business credit profile to find out if it's in their best interest to do business with you.
• You might lose a deal to a competitor if you have bad credit.
• Don't allow your permits, licenses and other registration materials to become outdated; this can have a negative impact on your credit profile.
• Always pay your bills on time. Missed payments have a negative impact on your financial standing.

Who Can Help:

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Resources

• Small Business Administration
• Experian