Business growth is at the top of the priority list for most small and medium-sized business (SMB) owners. But managing that growth can be the greatest challenge you’ll face.
Rapidly building your team, manufacturing capacity or service offerings to capitalise on new business opportunities requires fast access to finance. That’s why building your business credit before you need it is the key to successfully responding to market opportunities and managing your cash flow while you grow your business.
Here’s how you can get more credit for your SMB.
- Optimise your personal credit rating
In the early days of your business, lenders will likely consider your personal credit rating before extending credit to your business. To optimise your personal credit rating, make sure you pay all your personal bills on time, maintain as much available credit as possible and keep your credit card debt under 30 per cent of your total credit limit.
- Hire a business credit coach
Working with a business credit coach is an effective way to clean up your personal credit history and obtain a healthy credit score for your company. The coach can handle all the time-consuming technical aspects of credit reporting, and provide advice about the best credit cards, lines of credit and other financing options for your business.
- Create a business credit profile
As your business grows, it’s important to separate your personal and business credit profiles to avoid missteps that could affect each side. Sole proprietorships and partnerships generally consider the owner and the business to be the same entity. Incorporating your business, on the other hand, creates a separate legal entity with a credit history independent of the business owner.
- Obtain business credit cards
Now that you’ve incorporated your company, you can apply for business credit cards. This will help you establish a credit history for your business, and making prompt repayments will demonstrate your reliability when applying for bank loans or other types of financing. Also consider requesting credit limit increases to build the borrowing power of your business.
- Open vendor credit lines
Requesting credit accounts from your major suppliers is another excellent way to establish a strong credit history for your business that will help build your credit over time. But ensure all vendor credit lines are in the business’ name and that your payment history is being reported to the relevant credit bureaus.
- Diversify your credit relationships
Build relationships with more than one lender to protect your business from sudden changes in lending policies or cuts to your credit limit. This will also keep you open to securing the best credit deals with a range of lenders as they compete for your business.
- Pay your bills on time
Your business credit history is not written in stone. Paying your bills on time will keep your credit rating high, but start making late payments and your credit rating will suffer. That in turn could lead to limit cuts to your existing credit lines and make it more difficult to apply for new credit.
Building credit for your business isn’t an overnight proposition. However, take the time to get it right, and you’ll have fast access to the finance you need to capitalise on growth opportunities as they arise.
