As a business owner, you may be focused on the day-to-day operations of your company, but it's important also to consider the long-term financial health of your business. One aspect of this is building and maintaining good business credit.
So, what is business credit? Simply put, it's a measure of your company's creditworthiness. Like personal credit scores, business credit scores range from 0 to 100 and are based on factors such as payment history, credit utilization, and length of credit history. Lenders, suppliers, and other businesses may use your business credit score to determine whether they want to work with you, and on what terms.
There are several reasons why building good business credit is important. First, it can help you secure financing. Whether you're looking to get a business loan or open a line of credit with a supplier, having a good business credit score can make it easier to get approved, and may even help you get better rates and terms.
Second, good business credit can help you manage cash flow. If you have access to credit, you can use it to cover expenses during slow periods or to take advantage of growth opportunities when they arise. This can help you avoid cash flow problems that can sink a business.
Third, good business credit can help you build relationships with suppliers and vendors. If you consistently pay your bills on time and have a good credit score, you may be able to negotiate better terms with your suppliers. This could mean lower prices, longer payment terms, or other benefits that can help you save money and grow your business.
So, how do you build good business credit? Here are some tips:
Incorporate your business: If you operate as a sole proprietorship, you may not have a separate business credit file. By incorporating your business, you can establish a separate legal entity that can build its own credit history.
Get a DUNS number: Dun & Bradstreet is one of the major business credit reporting agencies. Getting a DUNS number from them can help you establish credit and show up in credit reports.
Use credit responsibly: Just like with personal credit, responsible credit use is key to building good business credit. Make payments on time, keep your credit utilization low, and avoid taking on more credit than you can handle.
Monitor your credit report: Just like with personal credit, it's important to regularly check your business credit report to make sure everything is accurate and up-to-date. You can request a free copy of your report from each of the major credit bureaus once per year.
Building good business credit takes time and effort, but it's an investment in the future of your business. By establishing a strong credit history, you can access financing, manage cash flow, and build relationships with suppliers and vendors. So, take the time to understand your business credit and work to build it up over time. Your business will thank you for it.
+ At MAG Business Capital we have a program dedicated to helping business owners build their Business Credit step-by-step. Contact us today for more information at 407-900-7550
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Andres Hoyos
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andres@magbusinesscapital.com