It’s estimated that roughly half of all small businesses will fail within their first four years, according to StatisticsBrain. There are dozens of reasons why small businesses fail, among the most common, however, is inadequate capital. Without capital, it’s next-to-impossible to run a successful business.
Step #1) Update Your Accounts with Credit Bureaus
The first step towards building business credit is to update your accounts with all three of the major business credit bureaus: Experian, Equifax and Dun & Bradstreet. When a lender gauges your business’s candidacy for a loan or credit, it will likely pull your credit report. Create an account with each of these bureaus and check to make sure your information on file is accurate, complete with your business’s years in operation, address, phone number, number of employees, financial statements, etc.
Step #2) Open Bank Accounts Under Your Business’s Name
If you haven’t done so already, open a few bank accounts under your business’s legal name. Whether you operate a LLC, S-Corp, C-Corp, etc., you need bank accounts under your business’s name, not your personal name. Both lenders and credit bureaus will check your bank accounts, so don’t skip this step.
Step #3) Create a Business Plan
Not surprisingly, many banks and financial institutions are reluctant to loan capital to small businesses with little-to-no credit. This leads to the age-old question: how do you build credit without any credit? The good news is that you can submit to your business’s financial records to many of the leading credit bureaus (see above). Additionally, though, you should create a business plan that details the way in which you intend to run your business. Providing lenders with a business plan will increase the likelihood of receiving a loan.
Step #4) Apply for Credit from Multiple Lenders
Don’t wait until you need to credit to apply for it. After performing the three steps listed above, research some of the different business loans offered by banks and financial institutions. Interest rates and terms will vary depending on your business’s credit history and financial statements. However, applying for credit from multiple lenders should yield some new sources of capital for your business.
Step #5) Pay on Time
The golden rule of credit-building is to pay on time, every time. If you have a tendency to forget due dates, contact your lenders to see if they can set up an automatic payment system. Paying on time is critical to maintaining a positive credit score, making it easier for your business to acquire capital in the future.
For more tips on funding your business sign up for my complimentary business funding course for trendfund email subscribers: Funding 101