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Step 1
Build your credit through your purchasing behavior. Business credit is a function of how well you pay back your creditors. Those you purchase from will report your payment history to the main business credit reporting agencies.
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Step 2
Increase your income. Unlike your personal credit, income or income potential plays a significant role in improving your business credit rating.
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Step 3
Perform a credit assessment. Contact your bank and request a credit assessment. Most lenders require this prior to issuing or increasing credit ratings. Certain lenders may even require their own bankers to perform the assessment.
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Step 4
Focus on cash flow. Lenders will be assessing the ability of your business to create cash from operations. Net income is important, but not nearly as important as cash flow to bankers who live by the mantra "cash is king." Due to accounting methodology, the amount of income you receive can differ from income. Look for ways to increase cash flow from operations by reducing inventory on hand, increasing accounts payable and decreasing accounts receivables.
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Step 5
Use credit cards frequently. If you leave money in the account for interest to be deducted, you will build up your credit.
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Step 6
Highlight your "cushions" of protection. Cushions of protection are assets to sell off in case of default. Your banker will inquire about investments, land, inventory, payables, equipment, buildings, brands and intellectual property. Anything that can be sold if you can't pay back your loan qualifies as a cushion. The more cushions of protection you have against your debt, the higher your rating.
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Step 7
Reduce debt levels. There are ways to both increase cash flow while decreasing your liabilities. Try factoring receivables or doing a sale lease buy back, which involves selling your property to a buyer for cash and then leasing the property from them. The transactions result in a large up-front cash payment followed by a lease payment over a certain period of time. This allows your cash position to seem larger and any debt associated with the property to be taken off your balance sheet.
