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Building Your Credit Profile as Small Business Owner

Developing a healthy business credit profile is essential for any new smaller company with sights on long-term growth. Even if you’re not currently looking to expand your small business operations and add more employees, there will come a critical tipping point at which you’ll need to expand your product and service offerings to keep your revenue objectives on track.

Whenever you build some aspect of your business that presumably leads to improved cash flow, you should expect significant expenses that, more often than not, require a weighty investment of upfront capital. It’s at this stage, where small business owners begin strategizing their next steps, that they start exploring the advantages of commercial financing to support this new phase of growth.

However, before accessing any new credit for small business you’ll need to set aside some time to develop a strategy for building a positive credit profile. So, how do you established business credit when you don’t have it in the first place? It’s a fair question, especially if this is your first time applying for commercially orientated financing.

So, how is business credit established? Just like in the consumer lending world, business creditors want to see that you’ve taken small steps to build a trustworthy credit profile. There are several lending and commercial banking options, which we’ll discuss in further detail below, that can help you achieve this. If you follow these steps, you’ll begin developing a positive business credit profile in no time. These tips will place you on a path that tells business creditors you’re unlikely to default on your obligations anytime soon.

Even if you have already established some business credit, continue reading. The following tips can help raise your score even higher while positioning you well for receiving the most favorable lending offers. A positive business credit history is vital to the growth and health of your company. After putting these few simple pointers into action, you’ll be well on your way to a stellar business credit rating.

What is business credit, and how is it different than personal credit?

  1. Incorporate your small business

Before you access business credit, ensure that you identify as a business first. Legally incorporating establishes your company as a legal business entity. The primary advantage of incorporating is that it offers means of lawfully separating yourself from your business assets. The three main types of business corporation are as follows:

  • C-corps
  • S-corps
  • Limited Liability Corporations (LLC)
  1. Establish a business bank account

Lenders like to see that your business assets have been legally detached and separated from your personal assets. This includes your personal finances. For a number of reasons, if you aim to establish a positive credit rating, using a consumer bank account to manage your business funds is always ill-advised.

For starters, opening a separate business banking account to exclusively manage your business capital comes with several accounting and financial tracking benefits. Business lenders like to see that you’ve taken the steps to open a business banking account. At the same time, it shows that you’re serious about managing your finances.

In addition, when you prove to potential creditors that you’ve opened a business banking account, you are also telling them that you’re sufficiently incorporated and have been working on your business credit profile. Likewise, you’re establishing a clear paper trail for your business payment history. This always comes in handy when applying for a business loan.

  1. Always make timely payments

If your business is still in the early stages of development and you haven’t opened a commercial line of credit yet, be sure to pay all your bills on time. This action plan must include business utility bills, commercial rents, payments to vendor accounts, and especially any unsecured credit cards used for either personal or business purposes.

Small business owners are busy people. It’s easy to errantly miss a payment or overlook a bill. To ensure that your bills never lapse due to an oversight, set up automatic bill-pay for each account that offers the service.

Lenders often ask for non-conventional payment histories from utility companies and suppliers. It’s, therefore, wise to never fall behind on any bills you have from third parties. Remember that any delinquencies that end up in collections will show up on a credit report. Always stay on top of every bill, including all personal obligations outside the business.

  1. Open a business line of credit

As the age-old adage goes, you’ll need credit to establish credit. Once you have your personal finances separated from your business finances, and presuming you’ve been staying current with all your existing financial obligations, you should apply for a business line of credit.

A great place to start is with a business financing lender like New Bridge Merchant Capital. We make applying for small business lines of credit fast and simple. Our lines of credit help business owners like yours leverage a revolving account of up to $150,000 so they can add new products and services while expanding their business footprints.

Not unlike consumer trade lines, a revolving business line of credit from New Bridge Merchant Capital lets you continue borrowing money until the account reaches its credit limit. Whenever you use the line to make purchases or access funds, this sum is subtracted from the maximum limit. As you make payments and pay the balance down, you always can access more credit after paying the additional interest, if any.

For more on our business loans and line of credit services, contact us now to discuss how we can help put your small business on the fast track to profitable long-term growth.

Work With a Leading Commercial Lender

At NewBridge Capital Solutions, our loan products can help businesses of all sizes. With our exceptional customer service and reputable funding, we have become a trusted leader in the commercial finance industry. If you want to apply for a term loan that can provide working capital for your business, make sure to contact us.
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