A Guide to Raising Your Company's Credit Score
A Guide to Raising Your Company's Credit Score
If a company wants to attract the attention of potential lenders and get the funds it needs for its future growth, it requires a high credit score. A high credit score, however, is not instantaneous, and there are procedures that every business owner must follow. A company's credibility with lenders and investors can only grow with these measures in place.
First, your company must have a legal entity.
Without its own legal identity, your company will be unable to establish a credit history. Your only options are to become a limited liability company (LLC) or to incorporate. No bank or other lending institution will touch a sole proprietor's money for fear that it will turn out to be a personal loan.
2. Get Yourself a Reliable Home Address, Phone Number, Email, and Internet Connection
If you want lenders to take you seriously as a business owner, it helps to have a solid physical location for your company. Also, it's crucial to have a way for people to reach you, such a phone number, email, and maybe even a website. This will allow for faster communication.
3. Verify the Listings for Your Company
Verify that your business is registered with all relevant authorities and that all of your listings have the same legal name, phone number, and address. Having a consistent identity on file with all of your personal creditors is crucial.
4. Acquire Any and All Required Commercial Licenses, Permits, etc.
In the state, city, or county where your business is located, you must acquire a business license and, if necessary, a tax resale license. To keep your firm functioning smoothly, you must adhere to all applicable regulatory requirements.
5. Get Your Financials and Taxes in Order
A certified public accountant's assistance is strongly advised while preparing the financial statements, which should cover a minimum of two years. In addition, your company really must have its own tax ID number right now. A single legal business name should be recorded for both federal and state tax purposes.
6. Reliable Financial Institutions
In order for your company to get a credit rating, you need at least one bank reference. Additionally, in order for your bank account to be considered for a loan, it is preferred if it has been operational for at least two years and has maintained a steady balance of $10,000 for the previous three months. Your banking records will show the results of your cash flow management strategies.
7. Collect minimum of five references from tradespeople
In order to open a credit account with your company, you must provide five trade references. Any business from whom your organization has bought products, ideally on a frequent basis, can be considered a supplier. When organizations are looking into your financial history, it's important to find references that will paint a positive picture.
8. Report to Collection Agencies
Obtain three separate business credit cards that do not relate to you personally; this will allow the credit reporting companies to evaluate your firm objectively.
After you've done all of that, the last step in establishing a stellar company credit score is to always play by the rules and pay your payments when they're due.
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