Strong credit is important to businesses just as it is personal finance – maybe even more so. Banks put an emphasis on the creditworthiness of companies when making decisions about small business loans. If your company’s credit score is not as strong as you would like, there are ways to improve it in short order.
Rohit Arora, founder of Biz2Credit, a small business financing platform, offers these tips for improving your credit score:
Separate personal and business accounts – Keeping any blemishes from your personal accounts separate from your business is essential. Make sure your business bills are paid on time, hopefully in full, but at least the minimum.
Apply for a company credit card and pay the bill each month – Establishing a strong track record is good for your business, just as it is in your personal financial life. Take advantage of credit card companies sweetening the pot with loyalty programs and other points programs that offer rebates and rewards. As with personal credit cards, pay the bill on time (and hopefully in full) or your credit score will take a hit.
Incorporate – Some people keep things loosely structured in today’s gig economy, but formally establishing your company as an LLC, C-corp or S-corp provides an aura of seriousness and permanence. In addition, there are incentives in the new tax code that benefit corporations.
Stay lean – Even big companies are following this tenet. Keep inventory low, control payroll and reign in expenses. You probably don’t spend mindlessly at home, so don’t do it with your business.
Arora recommends monitoring your company’s credit score just as you would your own (or should). Credit score information is available from the three major credit bureaus – Equifax, Experian and TransUnion. Review your report at least quarterly to make sure there are no errors. If you find an error, contact the creditor immediately to resolve the issue.