Updated: Jul 18, 2019
Having a favorable credit score is vital for a business to obtain necessary funding for its future capital needs and growth. But a good credit rating does not come instantly. These steps will help improve your business credit rating as well as maintain a favorable reputation to lenders and investors.
1. Make Sure Your Business is a Legal Entity
Your business will not be able to build business credit if it does not have an entity. Consult an attorney about incorporating or form an LLC (Limited Liability Company). Lenders generally will not give a business loan to a sole proprietor because it might be a personal loan in disguise.
2. Have a Business Address, Telephone Line, Email and Website
Having a physical location for your company adds credibility for lenders to believe that your company is legitimate. Ideally your office address is not your home address. There are several co-working spaces where you can obtain an address to use at a reasonable cost. Having a business phone line, email address and a website is also essential.
3. Check Your Business Listings
Have your company listed under all the necessary agencies under the same exact legal name, phone number and address. It is very important for all your creditors to have you listed under a uniform identity.
4. Obtain All Necessary Business Licenses, Permits, etc.
Obtain a business license for your company and if applicable, a license for tax resale in the state, city or county location of your business. Follow all the necessary regulatory guidelines for running your business.
5. Organize Financial Statements and Tax Returns
Be ready to present at least two years of financial statements using the help of a CPA or business owner financial software. It is very important that your business has its own tax ID number. Both federal and state business tax ID numbers should be enlisted under the same exact legal business name.
6. Secure Bank References
How you manage cash flow in your business will be reflected in your banking.
A minimum of one bank reference is necessary for your business to establish its score. Ideally your bank account should be active for at least two years, with a good stable balance for three months for it to be in a favorable position for lending.
7. Obtain At Least Five Trade References
Your business will need five trade references that have given you a credit account. This may include your suppliers or any firm in which your company has purchased goods on a regular basis. Make sure to choose references that will give a favorable credit history.
8. File for Credit that Report to Agencies
Get three business credit cards that do not have personal links to you and will give business credit reporting agencies their feedback on your company.