As a small business owner, you are probably busy trying to grow your business, or considering different financing options to do so. You figure a business loan will help you achieve your goals , but you’re unsure of how your business credit score will affect your chances of getting the funding you need.
Don’t worry, we have some tips for you.
The first step to maintain a good business credit score is to understand what it is, and how it impacts your business as a whole. Lucky for you, we have it all covered here.
Now that you have a better understanding, let’s talk about steps you can take to maintain a good business credit score.
1. Separate Personal and Business Credits
When you are starting a business, having a strong personal credit score is a near necessity. But there is a downside to relying heavily on your personal credit, even after your business has been fully established. If one day your business faces financial risk, your personal credit becomes at risk too, which will could ultimately limit your business’s long-term growth potential.
So what should you do? Apply for a Canadian Business Number, register your business, obtain a proper business license and credit account. Always keep your business and personal credit separate, so you dont ever have to put your personal credit at risk when applying for loans.
2. Maintain a Great Payment History
In basic terms, this means: paying your bills in full, on time, or better yet, in advance! Seems pretty straightforward, right? To get your business credit score as high as it can be, you have to pay every single one of your vendors and suppliers on time. Your business credit score relies heavily on how timely you are with your outstanding debt obligations.
It’s great to pay your bills on time, but paying it early is even better. Why? Because vendors and lenders can leave comments on your business credit report such as “pays in full, pays early, pays slow, etc.”, which can indicate to potential lenders that you’re in control of your finances.
3. Regularly Monitor Your Business Credit Report
Make sure you understand what is in your credit report and what contributes to your business credit score. If you need a reminder or aren’t sure, check out this great article here.
Once you’ve developed a strong understanding of the two, review a copy of your personal credit report and ensure there aren’t any inaccuracies. If, by any chance, you see that there are inaccuracies on it, report it to one of the two Canadian credit agencies: Equifax & TransUnion.
Keep tabs on your business’ financial health right here
4. Keep Business Credit Debt Levels On the Low
You’ll probably need a loan or two to get your small business started and grow
5. Choose Your Suppliers And Lenders Wisely
There are a lot of small businesses out there that have incomplete credit reports resulting from vendors and lenders not reporting loans issued to business credit agencies. As it turns out, lenders are not required to report this information to credit bureaus. If you do have a strong great repayment history, it’s best to ask your lenders and vendors to report that to the relevant business credit bureaus. And if they don’t, ask them if they can start doing so. There is no cost for reporting this information, so there is a good chance that many suppliers will agree to report. If you have a new business and are in the process of building up your credit history, make sure to choose lenders and suppliers that report to one of the major credit bureaus.
Final thoughts — as a small business owner, you are most likely focused on growing and expanding your business, but keep in mind that maintaining a great business credit score has a lot of benefits, such as low-interest business financing and better payment terms from lenders and suppliers.
Now go out there and improve your credit score!