20 percent of businesses will fail in their first year, according to the Bureau of Labor Statistics. Even more fail within the first 5 years than they open.
That doesn't have to be you. One of the first things you should do when you operate a business is building your credit. Building business credit not only helps you financially but gives you more credibility.
Here are 5 tips for any business owner on how to build on that credit.
1. Borrow from the Right Lenders
When you start your business it all begins with a lender. Before you settle for any loan product, be sure the lender you work with reports to credit bureaus.
If you work with a bank or established lender, it is routine for them to report your activity to credit bureaus. There are a select few online lenders who do not. In this case, your routine payments and punctuality will have no impact on your overall score.
Start our no-obligation application process to get to know your options better!
2. Apply for a DUNS
A DUNS or Data Universal Numbering System establishes a credit file on an individual business.
You get a 9-digit number that you can give to potential clients or partners to relay the health and status of your company. This not only provides accountability but also trust between you and others.
This number is important when it comes time to ask for a future business loan.
3. Establish Business Contact
Once you have a lender relationship and are ready to open, establish a business address and phone number.
This step might feel like a no-brainer but not for the reasons you assume. For one, when you establish yourself as a legitimate business you can set yourself up on various sites-- Yelp, Angie's List, etc.
These types of sites require an address and contact information for your business to appear in a search. These sites, much like lenders, share their information with credit bureaus which will establish credit.
4. Get a Business Credit Card
As your business grows, choose a credit card or line of credit with a company you like. When you are able to separate your personal and business spending you can build business credit.
When you choose a credit card, be sure to check for reward programs, cashback, frequent flyer miles, and so on. Interest Fees and other additional payments should be made clear before you sign anything.
5. Make Your Payments on Time
Pay your bills on time and in full. Like any form of credit, this is incredibly important for small business owners.
It is difficult when you start a new business to keep with finances, but if you want to know how to build credit, this is it. Set up a budget you can adhere to and stick to it.
Building Business Credit from the Ground Up
If you feel overwhelmed by the stress and financial aspect of building business credit, you're not alone. From being denied loans at the bank, going through the red tape of opening a building, and so on, it's a tough start.
If you want to know more about how to relieve some of that stress, learn more about what CapFront can do for you!