by Lina Martinez
Most startups find themselves in a bit of a predicament when it comes to building business credit. How are you supposed to develop a good credit rating when you can’t even access any credit? It seems like an impossible challenge, but there are some ways you can improve your chances, as you will discover below.
An increasing number of entrepreneurs are taking the plunge and starting up their own company. This is an exciting time, but it is not without it’s hurdles and barriers. One of the biggest obstacles that will get in your way is building business credit. This is notoriously difficult, but even more so in today’s economic climate, which is why hiring an accountant is highly recommended. After all, this can be the difference between success and failure, and as renowned businessman Jos Opdeweegh explains, the first two weeks in any startup is critical, so you really need to get the ball rolling financially from the very start.
A catch 22
Start-ups find themselves in a catch 22. You want to build up a positive credit status. However, you will find that most traditional lenders, such as commercial banks, are highly reluctant to lend money to a business until it has proved itself and has a strong credit history. But, how are you supposed to prove yourself if no one is going to take a chance on your business?
Steps to take
There are some ways you can give yourself the best chance of building business credit so that you can develop a positive credit record and give your business the platform for growth. One of the first things you should do is open a business bank account. You can’t build up business credit if you don’t have a bank account in your business’s name. Do this as soon as possible and be sure to use the account – it should demonstrate your activity and turnover. This account needs to have a positive impact on your business, so make sure you pay bills on time and have enough money in there. You don’t want it to have a detrimental impact on your credit score.
Aside from this, it is also recommended to ensure that your personal credit record is in check. This will reflect positively on you, which in turn reflects positively on your business. After all, your business is not yet in a position to be assessed by lenders, but you are. Take a look at your credit report and see if there is any room for improvement.
After you have done this, you should make sure that all your accounts are in check. Good accounting has a positive influence on the credit rating of your business. You can then start to build your credit history. No credit history is just as detrimental as bad credit history, so you need to start building up a good payment history if you want lenders to give you business credit. Make payments on-time and keep your balance low.
All things considered, hopefully, you now have a better understanding of the approach you should take when trying to build up business credit. This can be difficult, but with the right attitude and strategy in place you have a greater chance of success.