How to Establish Your Best Business Credit Score

Without credit, it would be incredibly difficult for us to have any of the things we often take for granted, such as an automobile or a home. Just as you have your own personal credit which helps lenders and banks decide whether or not to extend credit to you, your business also has its own credit score. How does a business credit score work? How can you go about building your best business credit? In this blog, we will discuss several options you have available when attempting to build business credit for the very first time.

What is Business Credit?

Giving your company the ability to borrow money, business credit is often the determining factor in the success of your startup or new endeavor. Having a separate legal entity, such as a corporation, LLC, or non-profit, gives business owners the unique ability to create a credit identity with business credit reporting agencies. By doing so properly, you can greatly increase your chances of lenders extending credit to your business.

Personal Credit Scores Vs Business Credit Scores

Although they may appear similar in nature and function, business credit scores differ from personal credit scores in a few key areas, outlined below.

Scored from 300-850 (720+ is good), personal credit scores are based on:

·      Personal Credit Payment History – 35%

·      Personal Credit Card Utilization – 30%

·      Personal Credit History in the Bureau – 15%

·      Personal Credit Mixture – 10%

·      Personal New Credit – 10%

Scored from 0-100 (80+ being good), business credit scores are based on:

·      Business Credit Payment History – 50%

·      Business Derogatory Credit History – 15%

·      Business Credit Card Utilization – 15%

·      Business Credit Payment Trends – 10%

·      Business Company Information – 10%

As you can see, your payment history is heavily weighted when cultivating your business credit score. How can you best leverage this trait to quickly improve your business’ credit score? By examining the types of initial business credit, we can find solutions which are ideally suited to the needs of your business.

What are the Initial Types of Business Credit?

As a newly formed startup, or existing business, there are several different types of credit you can develop.

Service Credit

Service credit is one of the easiest forms of business credit to establish early. Utilities such as your internet, cell phone, cable, web hosting, and more are all agreements your company makes with providers. By paying these bills on promptly and in full, you are quickly and easily gathering credit for your business.

Retail Credit

Many brand retailers, both small and large, offer credit cards for their specific store. Signing up and using one of these credit cars for a store you frequently purchase products from can be a great way to build up your retail credit.

Vendor Credit

Many vendors are willing to extend credit to startups with certain, usually minimum, requirements. For example, some vendors may require an initial purchase or deposit prior to extending credit terms.

Supplier Credit

Depending on your suppliers, you may also be able to purchase supplies for your business and defer payment. This option of credit can be quite useful for businesses seeking to conserve their cash flow, as it gives you the ability to generate revenue with your products before you have to pay for them.

Business Credit Cards

Applying for a business credit card is an essential component of owning and operating a business. These credit cards allow you to separate your personal finances and credit from those of your business. You are then able to build your business credit without endangering your personal credit whatsoever. Using and then paying the accruing bills from your business’ card is an effective way of building credit. 

Establish Your Business Credit with Webb Street Financial

Business credit, and effective methods of building it, is one of the industry’s best kept secrets. If you take the opportunity to build business credit professionally with Webb Street Financial, you can help ensure that you secure business funding quickly, easily, and ongoingly.

Contact our team today to get started on building your business credit profile and scores, as well as securing your business’ financial future.