Having good personal credit is a hallmark of proper financial planning. Small businesses also need to have excellent credit ratings if they intend to use the company's reputation to expand. For smaller companies that don't have angel investors, having a positive credit rating could impact the company's growth and development over the long term. Building good company credit requires understanding how business credit works and how enterprises establish their credit reputations within the financial space. Bad credit ratings can doom a company and may be nearly impossible to recover from.
These are valuable insight to companies on developing proper borrowing habits and building a company's credit rating through smart investment.
1. Borrow Within Your Means: Create the self-discipline to borrow what you know you will be able to repay in a timely manner.
2. Start Small: I suggest starting small, establish lines of credit with things that you need and use all the time for your business. A good example is office supplies. Making small purchases and timely payments will aid in establishing good credit.
3. Form Good Credit Relationships with Vendors and Clients: Small business owners should aim to form healthy credit relationships with well-established vendors and clients. They can, in turn, utilize their credit references to build their reputation and credit standing.
4. Work with Financial Institution/Vendors That Report to Credit Bureaus: A great way to build your business credit is to work with vendors that report payments to the credit bureaus. Similar to asking your personal landlord to report your rent payments, vendors can report payments to build your credit. Discuss with your vendors whether they already do, or if they would be willing to report the payments. Then, make sure you make on-time payments with the vendors.
5. Pay Off Credits on a Weekly or Monthly Basis: I have found the best way to build business credit is by paying off business credits on a weekly basis or monthly basis, always make sure that all your business credit are paid off every particular day in a week or a particular day every month no matter what.