Credit rates right now are incredibly low and banks are eager to give people with solid business plans capital to start up their business. However to access that money you’ll need to work at building your business’ credit to make it an appealing target for investors. Banks and other lending companies will do their due diligence before deciding if your business is a worthwhile investment for their money. Here are a few tips for making sure you can get the money your business needs to succeed.
Have a Strong Business Plan
A business plan is a document that describes your business in detail: how it will function and succeed, what resources you’ll need, and a long-term plan for the business. Quick research can come up with several guides for composing a business plan that will appeal to investors. Remember, they haven’t been with you while you designed the business. You’ll have to sell it to someone and make them care about your idea.
Fill Out the Right Paperwork
Your small business, like a person, will require a lot of care and paperwork when it’s born. Remember to incorporate your business and obtain a Federal Tax ID #. This is the birth certificate and social security number for your business and will represent your business when you’re applying for credit.
You’ll also want to register with Business Credit Bureaus. These privately held companies function just like the big three consumer credit agencies. Business Credit Bureaus are an essential part of building business credit and allow you to directly monitor how banks and other lenders will perceive your company.
Consider All Credit Sources
There are a lot of different ways to obtain a line of credit for your small business. One of the first that comes to mind is the business credit card. Every credit card company worth trusting with your information will offer a business credit card structured differently from a personal credit card. These cards will have higher limits and lower interest rates and will frequently come with other tools to help keep your business running smoothly.
Vendor credit is another credit source that might work for your small business. Consult your vendors and ask about any credit programs they offer to companies that purchase from them. These vendor lines of credit attach you to a company that has everything to gain from your company’s success and can improve the relationship between your small business and your product supplier.
It is important to maintain diverse lines of credit as each credit type affects your credit rating in a variety of ways. Diversifying these sources of credit will insulate your business from the affects of defaulting on one credit type or any other fluctuations in payment.
Use Common Sense
Remember to build a solid payment history. All the diverse credit types in the world are worthless if your business doesn’t look like it can pay back its loans. Stay on top of your payment schedule and pay in advance if you’re able. Lenders will be more inclined to loan credit to a business that looks like it has everything together.
Also, remember to stay informed about changes in rates and credit types. Subscribe to newsletters or magazines that deal with this information and research it on the internet. Good credit is essential to building a solid business so you can’t do too much research on it.
With these tips in hand get out there and start building business credit.