Article Summary: Building and maintaining a strong business credit profile can be an invaluable tool for any small business, but particularly for those businesses that rely on borrowed capital to fuel growth or other business initiatives. Fortunately, the process for managing your profile is pretty straightforward.
Although a strong business credit profile isn't a guarantee your loan application will be accepted, you will have more options than another business with a poor profile. There are five things you can start doing today to improve your profile that you shouldn't ignore:
- Regularly review your profile: Fortunately, the business credit bureaus make it fairly easy to view your profile, so there's no reason not to get more familiar with your profile.
- Avoid using your personal credit for business purposes: It's important to separate your personal and business credit usage. Using your personal credit for business purposes won't help you build a strong business credit profile and could even hurt your personal credit score.
- Establish trade accounts with your suppliers: One of the easiest ways to start building a credit profile is to establish trade accounts with your suppliers. If your suppliers don't offer trade accounts, there are companies like Staples, Home Depot, or Lowes that offer many of the supplies used by small businesses that do.
- Make sure your suppliers report your good credit history to the appropriate credit bureaus: If they don't report your credit history, you may be building a good credit relationship with that particular supplier, but it's not doing anything to build a strong profile generally.
- Use the credit you need and stay current: The single biggest thing you can do to build a strong profile is to use the credit you need and make each and every periodic payment obligation in a timely manner.
If you haven't reviewed your credit profile lately, there isn't a better time than right now. In fact, a monthly review isn't too frequent—after all, we tend to impact the metrics we work with the most. Keep reading to learn more.
Smart Business Owners Know What’s In Their Business Credit Profile
We regularly talk about the importance of paying attention to your business credit profile and your personal credit score. Before you can make a positive impact on your profile, it’s important to know what it looks like. Regularly reviewing your profile is one of the single biggest things you can do to improve a weak profile or build a strong profile from the earliest days of your business.
It may be an inconvenient truth, but it won’t happen overnight. There are no quick fixes to strengthening a weak business credit profile, it’s really slow and steady that wins this race. Nevertheless, there are a number of things you can start doing today, that will have a positive impact on your profile in less time than you might think.
Earlier this year, we took a deep dive into business credit and looked at the information business credit bureaus, like Dunn & Bradstreet, collect about your business. We also shared five things you can start doing today to improve your profile. You can view that webinar HERE. I hope you’ll check it out.
Five Things You Can Start Doing Today to Improve Your Business Credit Profile:
Although a strong business credit profile isn’t a guarantee you’ll get the financing you might want, it will provide additional options unavailable to a business with a poor credit profile.
1. Get Familiar With Your Profile:
While it may sound overly simplistic, regularly reviewing your profile is one of the most important steps to help you build a strong business credit history. It will give you an opportunity to make sure there are no errors that can negatively impact your profile and, as business people, we tend to impact the metrics we pay attention to the most, a regular review is the first step to improving your business credit profile.
2. Avoid Using Your Personal Credit for Business Purposes:
This can be challenging for many businesses, particularly for earlier stage businesses that haven’t established a strong profile yet, but it not only doesn’t build your business profile, it could even hurt your personal credit score.
3. Establish Trade Accounts With Your Suppliers:
This is one of the easiest ways to establish a strong credit profile. It might not be a small business loan, but many vendors and suppliers offer payment terms to their best customers. It’s a great way to build a positive track record, which is what creditors want to see before they offer your business a small business loan.
4. Make Sure Your Suppliers Report Your Good Credit Behavior:
This is an important step. If they don’t, your good credit behavior may help you build a strong relationship with that particular supplier, but it won’t help you build a stronger business credit profile. I think it’s important enough to ask any time you’re evaluating a potential new credit relationship with a vendor or supplier.
5. Use the Credit You Need and Stay Current:
This is the single biggest thing you can do to build a strong business credit profile. Lenders that are evaluating your business’ credit worthiness are really looking for the answers to three very important questions; 1) Can you repay a loan? 2) Will you repay a loan? 3) Will you make each and every payment on time, even if something unexpected happens? Your business’ track record will help them determine the answers to those questions, so making each and every payment to your suppliers, your business credit cards, or other small business loan, is critically important.
When Was the Last Time You Reviewed Your Business Credit Profile?
If you haven’t recently, the major business credit bureaus, like Experian, Equifax, and Dun & Bradstreet, make it possible for you to review the information they’ve collected on your business. And, other companies, like our partners at Nav, can also help you learn more about your business credit profile. If it’s been a while, there’s no time like the present. If you’ve been regularly monitoring your profile, please share with us how you’ve done. Has it made a positive impact on your business’ credit profile?