Building Business Credit

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Whether you are considering incorporating a business or your venture is already off the ground, borrowing money is a necessity

June 23, 2017
Author: NCH

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For many small business owners and entrepreneurs, the process of building credit is confusing and often disappointing. The maze of paperwork and preparation seems endless and uncertain. Credit approval is a meticulous process, especially for startups. It requires planning and familiarity.  That’s why hundreds of executives just like you rely on outside services to help them become creditworthy in the shortest time possible. Not sure how to establish business credit? You’ve come to the right place.

Where do you start?

Most small businesses tend to finance initially with personal savings and the owner’s assets. However, that becomes difficult to sustain once your business reaches a certain rate of growth. That’s when business owners find out that obtaining a business loan is far more complicated than obtaining personal credit. The success of many business enterprises have been cut short because few small business owners know how to find credit or investment solutions to fund their business growth. You need to build a business credit profile. Advanced preparation will significantly improve your chances of approval for your business loan. Business Credit is a wide net that can encompass several terms. For sake of clarity, credit is two areas: Trade Credit and Bank Financing. Your objective should be to set up freely spendable working capital that you can use to start, build and grow your business.

Step 1. Pre-Qualification Credit Analysis

The first step in the credit acquisition process is to analyze where you currently stand with a Business Credit Analysis. That is the same first step a potential lender will take in this situation. The Business Credit Analysis identifies the status of your company by building a business credit profile that will make your application more likely to succeed. The first step towards obtaining financing for your business is our pre-qualification process. Certified FICO Professionals perform a full assessment of your current personal and business credit status using a proprietary diagnostic checklist that reveals the truth about your options. When you apply for a business loan, most lenders look at your personal credit and the business credit profile to determine if you’re suitable for a loan. From there, they determine the amount and terms of that loan. This is a great first step to get business credit and guide the path towards success.

Step 2. Consultation

Depending on your credit status, your business might be eligible for funding right away with no further steps. Your credit report might also have some “blemishes” that need to be fixed before moving forward in the process. Whatever your financing needs are, whether you have poor credit, ok credit or good credit, it is possible to obtain a loan for your business. Getting the financing you desire is a matter of knowing where to go and understanding the processes involved. If your credit does not meet the minimum underwriting criteria, there are several credit improvement strategies and resources to help you improve your credit. Call us to learn how to start business credit today!


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Step 3. Strategic Planning

  1. Be sure to keep your information current with all three credit bureaus. There are several credit bureaus collecting data and creating business credit scores, including Dun & Bradstreet, Experian and Equifax. However, compared with personal credit scores, which follow the standards set by Fair Isaac Corp. to produce a standard FICO score, business credit scores are much less streamlined. Each business credit bureau has a different formula for calculating scores, and different lenders report different types of data, but be sure to borrow from lenders that report to the credit bureaus!
  1. You should establish trade lines with your suppliers. Your vendors can extend a trade credit, which allows you to offset times to pay for your supplies. Making an Accounts Payable relationship with your vendors means they report your payments to a credit bureau. Stick to the terms of the trade agreement and watch your credit score rise to new heights.
  1. Be sure to make payments to creditors on time if not early! Each bureau applies different methods to arrive at the number they assign, but some will only award perfect scores for those who pay early. Payment history will always be a contributing factor in your credit score, in addition to credit utilization. While it’s great to have access to credit, avoiding reaching the limit is best practice for trying to increase your credit score. Instead, try to stay between a 20-30% range.
  1. It’s important to know that your credit history has knowledge of your public records. So your score will definitely take a hit with bankruptcies, liens or debt collection lawsuits. These discrepancies can last 7-10 years so it’s best to avoid these at all costs.

Step 4. Applications & Approvals

Once you’ve applied the above strategies and your credit score is at an acceptable number, the next step is to begin the application process. When your business passes pre-qualification and lender preparations, you’ll have an outline of accessible funding options. With options comes opportunities!

Learning how to get business credit might seem daunting, but with the right help, it can be an easy and expedited feat that will sure be worth it. Good credit will get you those low interest rate loans, business credit cards and even better terms on those vendor agreements. Your business credit score is also public information, so it’s important to let your customers know that you excel with finances. Ready to learn how to get business credit and build your profile? Give the credit experts at NCH a call today at 1-800-508-1729.

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