A solid credit profile can allow a start-up company to borrow money for both short- and long-term needs, including solving cash flow challenges, making payroll, expanding … the list goes on. Credit also equals credibility. A solid credit profile simply creates better relationships with partners, vendors and trade sources. Now, more than ever, it pays to take active steps to make your business more creditworthy.
Of course, paying vendors on time and actively monitoring your business credit report at least quarterly is essential. But consider some other ways to strengthen your business’ credit:
1. Establish a business entity. It’s critical that your business is viewed as a separate entity from you personally.1 Establish a business bank account in your business’s name using an employee identification number (EIN). Log and submit to credit agencies all business payment activity under accounts that are exclusively under the name of the business.
2. Apply for a business line of credit at your bank. Revolving lines of credit offer the flexibility for you to draw funds for business purchases as needed, and then repay on your own schedule. Credit availability is replenished with each repayment. Start with a small credit line to establish your company as one that pays promptly so you can work your way up to larger credit lines as you grow.
3. Report transactions. Unlike credit reporting on the consumer side, there is no requirement for suppliers to report transactions with your business to credit agencies. It’s voluntary. You can be proactive by asking or by filling out a trade reference request.
4. Clear out outdated public filings. Typically, banks require businesses to put up assets as collateral in exchange for a loan when purchasing large equipment. Under Uniform Commercial Code (UCC), the bank reports the transaction and notes the collateral being used in exchange for the loan. Once the loan is paid off, the collateral asset is no longer at risk, but if the bank does not report that the loan is paid off, the credit agency is unaware and the result is a credit score that still reflects this liability.
5. Update business information. Be sure to amend any incorrect or out-of-date business information. As your business grows, it’s important to keep your credit profile up to date. For example, the more employees you have, the bigger your company is and the more creditworthy it may be perceived.
Get the Credit You Deserve
Building a credit history is as important to your business as it is to your family. Nevada State Bank's Business Centers are here to help you every step of the way – from qualifying, to processing paperwork and final closing. You’ll find conveniently located Business Centers in northern and southern Nevada.
1. Click here for an article about how to establish a ficticious firm name (DBA) for your business in Nevada.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC