Setting up credit for your business is an important step for any company. However, building good credit can take time, and business owners are often unsure of how to proceed. Here’s what you need to know to establish a strong credit score for your growing business.

How Long does it Take to get Credit for a Business?

Building credit is a long-term process. Estimates suggest it can take at least two years to establish a credit history for your business. Lenders typically want to see your track record over time to determine whether you are a reliable borrower.

Why is Building Business Credit Vital?

When starting a business, you may use your personal credit to apply for business credit cards or small business loans. However, it’s essential to keep your business and personal credit separate. Once your business has established its own credit, you can apply for loans without using personal collateral, and the business will handle repayment.

Benefits of Building Good Business Credit

The advantages of having good business credit include:

• Lower lending rates
• Increased confidence indecision-making
• Opportunities to outpace competitors
• Reduced stress for the business owner
• Much lower interest rates
• Easier access to funding

How to Differentiate Between Personal and Business Credit

Your business credit score reflects how well you’ve managed your business finances, including assets, accounts, and any loans taken out. Maintaining a good credit score is crucial as it influence slenders' willingness to invest in your business. To keep your score healthy, pay your bills on time and adhere to payment terms. Regular monitoring willhelp ensure your business remains in good standing.

Steps to Ensure Good Credit

1. Manage Your Structure: Ensure your business complies with all legal and regulatory requirements. Consulting with legal and accounting professionals can help ensure everything is properly set up. A well-structured business is more tax-efficient and better positioned for credit.
2. Open a Business Bank Account: Establish a separate bank account for your business to track deposits and withdrawals. Avoid bounced checks or overdrafts, as this will help maintain clean financial records and simplify tax preparation.
3. Set Up Trade Lines with Suppliers: Work with suppliers who offer favorable financial terms and establish trade lines with them to build a solid credit history. Some business owners find trade lines easier to manage than credit cards. For instance, inquire about credit options at frequently visited stores, and ensure you pay invoices on time.

‍The Bottom Line

Building a strong business credit history is essential for long-term security. By following these steps, you’ll be better positioned to access funding and gain a clearer picture of your business's financial health. Taking these actions will ultimately work in your business’s favor.