When you have a business, having a credit line is a great opportunity to afford additional expenses and build your company’s credit. Having access to extra capital is great for those unexpected expenses, and building your company’s credit can make you more valuable to lenders and business partners in the future.
If you have a business, it’s a smart idea to increase your credit line. Improving your credit is more important than you think, especially when it comes to business, and while it’s not something you can accomplish overnight, the following are four ways you can improve your business credit line and start reaping the benefits.
1. Start Early.
It takes about two solid years for your company’s credit history to actually mean anything, which is why it’s very important that you start as early as you possibly can. As soon as your company is in business, apply for a credit card or small business loan. This way, you can start building your company’s credit as quickly as possible.
If you’re having trouble securing a credit card or small loan, consider taking out a store credit card that can be used for your business, such as a home improvement credit card if your business involves construction or home improvement. These cards are typically easier to get and will report to the major credit bureaus, which will help improve your credit.
No matter what type of loan or credit you have, making on-time payments will show that you have a solid credit and payment history. After six months to a year, ask the company for an increase in your credit limit, and continue making your timely payments.
2. Secure a Dun & Bradstreet Profile.
Dun & Bradstreet is a reputable business data and credit reporting agency that many companies use to provide background information on companies they plan to do business with. It will cost a fee to have a Dun & Bradstreet number set up, but once you have a profile, you can add credit references.
If you have a good Dun & Bradstreet report, it can be enough to increase your company’s credit line and generate more interest from investors. This is especially beneficial for small businesses that have little capital or available resources.
3. Show Financial Responsibilities.
Just like you, your business has a credit report and score. This score is what creditors and lenders use to determine if they will supply you with a loan or not. Having a higher score means your company is less of a financial risk and increases your chances of getting a loan or credit line. Showing financial responsibility is the best way to improve your business credit line. For example, if you take out a loan or credit card, make sure you always make your payments on time. If you have credit cards open, do not hold a balance that exceeds more than 40 percent of the credit limit. And also, don’t apply for multiple cards or lines of credit all at once. If you apply for multiple cards or hold a high balance, this will negatively influence your score and make lenders feel like you’re not responsible.
4. Maintain an Accurate Report.
Sometimes the wrong information may be portrayed on your company’s credit report, and this can have an influence on your company’s ability to secure credit. Be sure to check your credit report regularly and check for errors. Look for major items, such as collections or delinquent payments. If these are wrong, contact the credit bureau and the company to resolve the issue. Removing wrong information from your credit report (especially those that were negative) can improve your company’s credit line
I am confident you have all heard the radio commercials about securing lines of credit of up to $100K for your business. While some of these are scams, most of them are legitimate firms. They are maybe Angel firms tired of leaving money on the table with equity based investments they aren’t comfortable with and would rather loan out the money now. Many of them may be loan shark as well looking to take advantage of poor business credit. Regardless of any need for additional funds, ensuring your business credit lines remain steady is the surest way to keep capital financing costs down.