Business credit is often the holy grail of small business owners. Obviously, not wanting to jeopardize personal credit, obtaining credit strictly in the business name should be every small business owner's goal. This is much more difficult done than said. If you are in the process of building your business credit, this article will explain the 3 do's and the 3 don'ts. Let's start out with the do's.
Here are the 3 do's of boosting your business credit.
1. Get listed on Dun & Bradstreet
Dun & Bradstreet is the credit reporting agency for small businesses. You need to contact them to open up a file. There are services on the internet that can facilitate this for you for a few dollars or you can do it yourself.
2. Request that your current trade suppliers report to D&B
If your business has trade credits with the local print shop or food supplier ask them to report your payment history to D&B. Over the course of a year, good trade history with a variety of suppliers will build a solid record with D&B
3. Open small outside credit lines in business name only once you have a solid D&B report, you should be able to open up small outside credit lines. The office supply store's Staples and Office Depot are well known for approving business credit in their stores. Once your business has a history with small amounts of outside credit, you can apply for larger limit credit cards and even try for a bank loan. Make sure each source you obtain reports to D&B, otherwise it doesn't help build your business credit. Bolstering business credit is a long, slow process but it can be done.
Here Are the 3 Don'ts to Bolster Business Credit
1. Don't mix business and personal credit. In the beginning of building business credit, you will be asked to co sign for your business's credit. You should avoid doing this. First of all, if you co sign, the credit history will most likely be reported on your personal credit report, not your business credit report. This does zero good when it comes to building your business credit. Secondly, you will become personally liable for the debts of your business. Avoiding personal liability is the reason you are building business credit in the first place.
2. Don't take out too much credit at first. Building business credit is a slow process. Take it one step at a time, don't take out too much at once. Even if you are lucky enough to get approved, don't tap out everything at one time. Credit is built over time, not in one swoop. Having too much credit, too fast can damage your business credit score for years. Be smart.
3. Don't miss payments. If you miss a payment when building business credit, it can damage your ability to get future credit. In fact, having bad business credit is worse than not having any business credit. Be very careful never to miss a payment!
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