Step 5: Give Credit to Your Credit

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Get a Dedicated Business Credit Card

If you already have a credit card for personal use, do your best to acquire a credit card just for the business. Be sure to look for benefits and rewards, like airline miles and discounts on business purchases, and also look for detailed reporting that often come with business credit cards. Another alternative is to get a business debit card. This won’t help improve your credit rating, but you’ll still be able to make purchases with funds available in your business checking account.

Tip

Build your credit early by starting with small accounts.

To build credit and credibility among vendors, establish Net 30 Day payment terms with a few vendors for very small amounts. Pay them perfectly, according to those payment terms.

You will quickly prove yourself to those vendors, strengthening your credit-worthiness as you seek to establish similar extended payment terms more broadly and on a larger scale with other vendors.

If you don’t pay on time and you’re reported to a credit agency, future vendors will be reluctant to extend terms to you, whether for lease payment terms, inventory payment terms, or other common payment terms.

There are plenty of credit card offers out there, and it can be tempting to accept too many, and before you know it, run up a pile of debt.

To monitor and throttle back on credit card spending, by the way, get out that cash flow forecast and check to make sure you can service future payments on purchases you make using the card.

Commingling

Getting the business credit card in place will go a long way to separating your business from personal financial activities. This applies to checking and savings accounts as well. As much as you can, try not to commingle your personal financial activities with your business activities.

Managing Your Business Credit

Once you’ve started using your business credit, you should consider getting an account through Dunn & Bradstreet, a firm that issues credit reports for small businesses. Dunn & Bradstreet’s reports vary in cost between about $30 and $150, depending on the level of information you seek.

To make sure that D&B report is favorable, never neglect one of the most vital aspects of maintaining your credit – making your payments on time. Whether it’s the leasing of equipment, credit-card statements or loans, paying those bills on time will only help you, while doing otherwise will lead to a negative rating. And if you can’t pay on time for some reason, make sure to ask for an extension. If you’re in good standing, many vendors will comply and not issue a negative report to credit-monitoring firms. Remember, the better your credit score is, the more likely banking institutions will give you loans at favorable interest rates, further fueling the growth of your company.

Leasing equipment and making payments in a timely manner can also give your rating a boost.