Do you know the current credit score for your business? If you do not know, then you are not alone While most business owners concentrate on growing their personal credit score, they do not put as much effort to grow their business credit score. It is no wonder that many business owners qualify for a personal loan but their business loans applications fail to go through because of poor business credit. Fortunately, with the right information, you can grow your business credit in just a few months. You have nothing to worry about if the numbers do not look too good in the present.
Why work to get a good credit score for your business
Your business credit score, just like your personal credit score, is important for your business success. If you plan to take a loan to expand your business in the future, you have to work hard to grow your business credit. You can be sure that every lender will do a thorough background check on your business to determine whether it qualifies for a loan. No matter how good your personal score is, either your loan application will be rejected or the loan will be more expensive if the business credit is bad.
Even when you do not need a loan, a good business credit score will help your business in many ways. For one, you will get better terms from your suppliers. Many suppliers will be willing to offer products on credit; you will not have to pay upfront for goods and services if suppliers have confidence in your ability to honor your payment within the agreed timeframe.
What to do to grow your business credit score
Let’s say that you have applied for a business loan and your application has been rejected because of a poor business credit score. What can you do to ensure that your loan application will go through in the next few months? Well, you can choose to use this tried and tested method.
Let’s see what happened to Arturo Barrios, the proud owner of Barrios, a small business who sells aguas frescas and some other Mexican treats. He went through the same ordeal. His business was doing relatively well and he wanted to renovate the front store and set up and outdoor patio to attract more customers. He needed funds to start the renovations, but his loan application was rejected on the grounds of poor business credit. The truth is that, during his two years in the business, Arturo had always used his personal account to do business transactions, thus failing to build any business credit history.
The lender advised Arturo to start by opening a business account with them. All business transactions were to be completed using this account. This not only led to improving his relationship with the lender, but it also made it easy for the bank to understand the aguas frescas business and its need for additional financing. A separate account for the business also meant that accounting for business cash became easier, without mixing it with Arturo’s personal finances.
Arturo was also encouraged to build solid relationships with his fruit and ingredients suppliers. After negotiating, his main supplier agreed to sell the products on credit. Barrios went on as usual even when finances were limited and cash on delivery was not possible. Credit purchases also earned the business trade credits and these would, in turn, give a tremendous boost to the credit limit.
Lastly, Arturo was advised to ensure that all bills were sorted timely. Where possible, bills were to be paid well before they were due. While the business rent had been paid late a few times in the past, steps were made to make payments on time and because the business was getting goods on credit, this was easier to achieve. A few months after following these easy steps to the letter, the Arturo was ready to apply for another loan. His business credit score looked much better then and because the lender understood the nature of the business better, the loan was approved. Just like Arturo Barrios, you can grow your business credit score in no time at all. Even though every business comes with its unique characteristics, there is a lot you can do to get a positive score for your business. It does not matter how bad things look in the present. If like Arturo you also want to build your business credit history or improve your business credit score quickly, read the 3 tips on How to Build Business Credit.