Finance Roll

Most people associate credit scores with their personal financial situation. Well, businesses also are assigned credit ratings, scores that can be the difference between getting a loan or not. In this article, we take a look at what is involved in building a high credit score for a business.

First of all, you must know that you can begin to build the credit worthiness of your business even before you serve your first customer. To do that, you will first have to register the company. Many people make the mistake of running a business under their personal name. You will have to keep your personal finances and business finances separate if you want to obtain credit for your business.

Your best bet would be to register your company as a LLC or S Corporation. The next step in the process will be to try to get an investment in your business. You can try to achieve this by coming up with a good business plan. Write a detailed business plan that will include your projected financial statements. Show this to potential lenders to attract an investment. When a lender with good financial history is able to back your business with an investment, it will do wonders for the credit worthiness of your business. You can approach vendors with confidence and tell them that you have the backing of a strong investor or a financial institution. Once a vendor is able to see that you are financially sound, they will offer you a line of credit with which you can begin making purchases of your business.

A line of credit from the vendors for your business is another great way to get your business credit history rolling. You will have to pay the vendors regularly. Also, make sure that you are dealing with vendors who will report the transactions to the credit bureau. Typically, large vendors will serve that purpose well as they will report all transactions automatically.

Other ways to build business credit history is by obtaining a business credit card. You have to be a little careful here as there are many high interest business credit cards on offer. Avoid those and pick one with a reasonable interest rate. You should try to opt for only one or two business cards as too many will negatively affect the credit score of your business. You can also try to build credit history by obtaining a loan from the government run Small Business Administration.

Once you have a credit history rolling for your business, check it once a year to check for inconsistencies or areas on which you can improve and better your credit score. Most people and businesses don't consider their credit score till they need to borrow money. If you have a problem with the score, it is then too late to fix it and obtain the funding. Stay on top of yours to avoid problems.