5 ways to build your business credit
When it comes to financing and growing your small business, establishing and building a credit history is key.
Wondering how you can access the credit you need to finance your small business? The earlier your business starts building credit with your bank, the sooner you’ll be able to find financing and bring it to the next level. There are many advantages to keeping your personal and business banking needs separate, and establishing a credit history for your small business is one of them.
Find out how to build credit for your business with these five tips.
1. Open a business bank account
An obvious but important first step - opening a business account introduces your small business to your bank without tying your business obligations to your personal ones. Consider it the foundation for building credit and financing your small business.
2. Use your business bank account responsibly
Tip: Manage your day-to-day expenses with a business debit card to minimize interest charges on credit cards.
Your new business bank account gives you, as a small business owner, the chance to build credit by showing your bank that you operate your business finances responsibly. Don’t overdraw your account or write cheques on it when you have insufficient funds. Make regular deposits and business bill payments from it.
3. Get a low-limit business credit card
Consider applying for a low-limit business credit card as another way to build credit. Remember though, if your business is still pretty young – say, three to six months old – your application may be based on your personal credit history.
Tip: If you need financing for some of your business’s larger expenses, or to chase down a timely business opportunity, a business line of credit may be the way to go.
4. Establish responsible credit card behaviour
When your business takes off, you’re not going to want to keep financing your growing company with a credit card. A business credit card should be good stepping stone to larger credit vehicles. So practise sensible credit card behaviour – pay your bills on time, preferably the full balance, and don’t overstep your limits.
5. Expand your credit portfolio as you grow your business
Don’t miss out on the chance to take your company to the next level because your success is outpacing your financing. Stay in touch with your bank to find the right tools to help you cover the increasing cost of running your business or to finance your next big thing. Expanding your credit portfolio with a line of credit or a business loan also gives your business yet another chance to show that it’s creditworthy.
Building a strong credit history helps start your small business off on the right foot. It keeps you on your current lender’s good side, and show future lenders you’re a responsible borrower. When you’re ready to take next your business to the next level, a good credit history will give you a boost.
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