It’s not really feasible for a new business to have no debt. Most need to borrow cash so they can grow or to get things they need in the lean times. So, as a business owner, the question isn’t if you will want a business credit account, it’s when.
Fact #1: Small business credit reports may not be kept apart from your individual credit scores.
Sometimes business credit and individual credit accounts are separate, but more times than not, this is not true. The credit scores of business accounts are collected by companies such as D&B and Credit.net, while individual account credit scores come from places like Experian and Equifax.
It’s important to have a good credit rating in both kinds of credit accounts. Especially these days when the business arena makes things very competitive. Even older businesses may sometimes have to use their owner’s credit worthiness to get a loan or business credit , so be sure to keep your individual credit in good shape.
Fact #2: Paydex Score isn’t the only score credit lenders use.
Business credit programs usually use the Paydex Score offered by D&B to check credit worthiness. However, there are other ways to measure this. Some places instead use reports and scores received through Experian, Equifax, the Small Business Exchange, and other business credit agencies. It’s not even consistent, as some lenders report things to one place, but not to another.
Fact #3: Paying your bills on time may not get you a solid promise of good business credit.
For example, you might own a company that has been around 20 years, but if you don’t have a decent credit file, you won’t be offered the valuable line of business credit you may need or desire.
How to do this? You have to borrow or buy merchandise and services from places that then give that info to the main business credit reporting bureaus. You can’t get a good business file going in your credit report if you credit history doesn’t make it into the reports. You must also have a solid financial plan in place before asking for a loan, as well as a strong accounting of all your financial dealings. Having these things, as well as a well written request, will make it more likely for you to get the account you need or desire.
Fact #4: When it comes to earning credit for you business, you have to do it right the first time you try.
Credit reports on a business aren’t covered by the federal law governing individual reports. While you can dispute incorrect findings on an individual account, you can’t do that on a business account. So, you better make sure the things in are correct from the start.
And, the quicker you begin, the better. For example, recently a lender offered loans not requiring documentation if the company was at least two years old. So, if you had a qualifying company, you would get a loan very easily.
It’s important to make your business look good, even if it doesn’t make a profit the first year or so. Having all your ducks in a row and taking the needed steps to be legal and upstanding with the credit agencies is a good start. Make sure you have all your licenses, list you phone number in the local directory, etc. You have to also have a good corporate structure to ensure your credit rating is up to par.
Having a superior plan for your credit card accounts in your business is something to be sure to have in your initial business road map. Good Luck.