3 Tips to Perfect Your Business Credit | Behalf
3 Tips to Perfect Your Business Credit
Believe it or not, not all businesses have business credit. Many private companies operate in a cash environment, leaving no public footprint to result in a business credit profile. Sole proprietorships are even more likely to lack business credit, as many small business owners fund their company with a personal credit card. Unlike personal credit, business credit does not naturally build as your company ages. But like a good personal credit score, a strong business credit profile will ultimately be required to get your business to the next phase of success.
Working capital requirements increase as your business starts to scale. While growth is good, the additional cash needed to keep up with that growth often surprises business owners. This is precisely when business credit evolves from something you wonder about to something you need. Running a business without business credit is like heading into a battle with no armor. It’s critical that you take a proactive approach and establish business credit before you need it.
Similarly to personal credit, your business credit profile is built by demonstrating healthy payment behavior consistently over a period of time. The more extensive your business credit history and the higher your business credit score, the more attractive you are to lenders that offer sound, affordable financing solutions. This is critical, as it will help you get approved for the best products at the best rates, reducing your cost of capital. Read on for tips on how to build business credit.
1) It’s time for a credit check-up
It might seem healthy to operate in cash, but this approach leaves you with blind spots. Checking your business credit is the first step to understanding where you stand. Your business’ credit isn’t only valuable to lenders, it can help you evaluate and fine tune your business spending habits. Obtain a full business credit report so you can review your credit history and look for patterns. Good business hygiene starts at the transaction level. Is your credit report accurate? It is good practice to monitor your credit on a regular basis with a service like D&B and quickly work to resolve inaccuracies and or suspected fraud.
2) Look for opportunities to boost your credit
Credit doesn’t come easy no matter where your business credit score falls on the spectrum. Bad credit takes immense time and effort to restore; good credit is even harder to raise into the exceptional range. Business credit is measured on a different scale than personal. Instead of 300 to 850, your business credit is measured from 0 to 100. The best thing you can do to build your profile is to get your cash payments “on the record” by transitioning to a payment method that reports to the business bureaus. If you’re using a personal credit card, now is the time to open a business credit card account. Commingling personal and business is a bad practice for numerous reasons – it complicates your accounting and prevents you from building business credit. You can also establish a credit line or look for financing with flexible payment terms. You build your business credit by abiding by the terms of your credit agreement and making on-time payments.
3) Protect your credit
When your business credit is strong enough to win the approval of any lender, it’s time to ramp up security. You’ve come too far to let your business credit plummet over identity theft and data security leaks. Running any business incurs risk. Every transaction you make with your vendors exposes your information, but you’ve come too far to go back now. Maintaining your business credit is an around the clock commitment. Look for safer ways to pay your vendors. The more vendors have your bank information on file, the more opportunities fraudsters have to steal your identity and wreak havoc on your business credit. Never provide your bank details directly to a vendor and ensure you choose a payment method that does not transmit your account details when it delivers your payments. Consider payment services that allow you to send secure e-payments instead of ACH or checks. Behalf can direct-pay vendors on a secure network, without giving them your bank information, and offers MasterCards with single-use account number technology. In short, Behalf payments leave no data footprint left to compromise.
Credit is a full time commitment and you owe it to your business to get it right. Building business credit makes your business more valuable. If you ever decide to sell your business or look for an investor, your business credit profile will no doubt factor into the interested party’s decision. No matter where you are in your business credit journey, be patient. There’s no quick fix to build business credit, but your efforts literally pay off.