Best Business Credit Building
I’m sure you’ve heard all the same old business credit building tips time and time again. Start with establishing several vendor accounts first; make several purchases; and always pay your invoices on time. We know these rules, and we know there’s much more to it in the real world.
While there is a great deal of tips and information on building business credit on the internet, you may discover that most of the information is either outdated, over simplified or just plain wrong. Now don’t get me wrong, there are lots of good resources (here and elsewhere) that you should read up on before you take action.
Once you’ve got the basics down, here are the best tricks that can help you improve the business credit building process and work your way up into a strong business credit file much faster:
Leverage your personal credit to your company’s advantage
During the initial stage of the business credit building process you’ve probably read that getting vendor credit is the best way to start building your company’s credit file. While starter vendors will certainly get you payment experiences reporting on your file the one trick that can also drastically enhance your company’s credit file immediately is also having revolving lines of credit reporting too.
This can be accomplished regardless if your startup or existing business and if your company has its file established or not. Basically, what you’re doing is using the strength of your personal credit rating to obtain unsecured lines of business credit for your business.
If you have good personal credit (680+ FICO®) you can obtain 4-5 business credit cards that only report to the business credit reporting agencies through our UBF program. This strategy will result in 4-5 revolving lines of credit reporting on your company’s credit reports.
So rather than starting off with only starter vendors reporting, now imagine your company having 4-5 vendor accounts along with 4-5 revolving lines of credit reporting on your business credit report. This one strategy alone can drastically strengthen your company’s creditworthiness quickly because it shows diversity and bank issued credit.
Leverage your business bank account to get business credit lines (no personal credit check)
Traditional banks only approve 24% of the applications they receive from small businesses. This is because banks and fintech companies require a personal credit check during underwriting.
The good news is if you’re an existing business and have monthly revenue coming into your business checking account did you know you can get a line of credit based only on your bank account data not personal credit?
With this strategy, you can access a line of credit with limits up to $100k without any impact to your personal credit. What makes this program so special is the way the lender makes credit decisions by reviewing your bank transactions. All you do is connect your business bank account and they automatically review your transactions to assess the health of your business. Check out our New Business Line of Credit post for more details.
Leverage your fixed expenses to build business credit
Every business has fixed expenses that are the same amount each month. These bills must be paid to keep the business in operation and usually get paid on a consistent basis, such as weekly, monthly, quarterly or annually.
Now I know every business has different fixed expenses and the operating costs can vary because some businesses are a brick and mortar operation while others may be home-based and operate solely through the internet.
The typical fixed expenses for a business are things such as rent, payroll, merchant services, phone and utilities, web hosting, internet service, inventory, licenses, professional services, subscriptions, and insurance to name a few.
Many of your company’s fixed expenses provide a unique opportunity for you to build business credit history. By paying your fixed expenses such as your phone, utilities, etc. on your business credit card each month you establish an ongoing payment history on your company’s credit report. You can always pay your credit card statement in full each month to avoid any interest.
Now keep in mind to implement this strategy you would need to acquire business credit cards that only report to the business credit reporting agencies not personal credit.
Other than paying your fixed expenses with a business credit card you can also use service providers that report your payment activity to the business credit reporting agencies.
For example, there is a merchant service provider that reports your processing fees to the business credit reporting agencies. So, each time you accept a payment from a customer via a credit card you are building your business credit. Now that’s a powerful business credit building hack.
Leverage your variables expenses to build business credit
Every business also has variable expenses which are expenses that change regularly and can go up or down. Variable expenses can be those daily spending decisions like eating at a restaurant with a client or buying your employees lunch. Other variable expenses can be running a marketing campaign, production supplies, commissions, shipping, packaging, fuel, etc.
Like your fixed expenses, many of your company’s variable expenses provide a unique opportunity for you to build business credit history too. When you pay your variable expenses such as a restaurant bill or a marketing expense on your business credit card you establish payment history on your company’s credit report.
Now remember, like I said in the previous strategy to implement this tactic you would need to acquire business credit cards that only report to the business credit reporting agencies not personal credit.
Use a credit partner to jump-start the business credit building process
In the first hack, we talked about how to leverage your good personal credit to your company’s advantage. But what if you have bad personal credit?
Although you still can get vendor credit since personal credit is not a factor, what we’re talking about is getting revolving lines of credit to speed up the business credit building process.
A strategy for overcoming a personal credit issue is using a business credit partner. If a spouse, family member, friend, investor, or business partner has good personal credit (680+ FICO®), they can leverage their good personal credit for your company so it can obtain 4-5 business credit cards that only report to the business credit reporting agencies (via our UBF program).
As I said earlier this tactic will result in 4-5 revolving lines of credit reporting on your company’s credit reports. So instead of only having 4-5 vendor accounts reporting during the initial stage, your business will have 4-5 revolving lines of credit reporting as well.
Now think about how powerful that would be for your business to have a total of 8-10 payment experiences reporting on your business credit reports in record time. This is before you even start applying for retail credit and other credit sources available for creditworthy businesses.
Best of all this shows diversity in your file right from the onset since vendor credit is short term financing and revolving lines of credit is long term financing.
Unfortunately, there are a lot of myths, outrageous claims and misinformation about business credit and business funding circulating on the internet. The good news is there are also a great deal of good and reputable resources (here and elsewhere) that you should take advantage of.
These five business credit building tactics are real, practical and proven ways to change the course of your business from having no business credit file or rating to having a creditworthy business with greater funding potential and financing opportunities.
Ready to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($497 value) =>
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.