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It is a truism for consumers and startups: it is much easier to get credit when you do not need it. Having access to extra money at critical times can be what keeps you afloat in the difficult early days of your startup. That is why it makes sense to find out how to establish credit for your new business and how to keep it strong.
Steps To Establishing Your Credit Worthiness
Businesses and consumers both need to look like excellent credit risks to banks, credit unions, credit reporting agencies, and credit card companies if they want to establish and keep their credit.
Here is a look at four steps to take towards building a creditworthy reputation.
Keep balances less than 30% of your credit card limit. Inquire about the personal credit rating of investors you are considering for your business. Lenders will likely look at those too.
Identify Lenders and Sources
Banks and credit unions are the most prominent places to get credit. Don’t automatically apply to the closest one. Look for one with a reputation for being friendly to small businesses. Ask other startups where they obtain credit. If a creditor gives credit to one startup, there is a good chance it will give it to you.
Ask other startups about which credit cards are the easiest to get. Apply for a business card as soon as possible. Don’t worry about the limit, the goal is simply to get the card. Use it often and pay off the balance in full each month.
Unique and Creative Ways To Get Credit
Don’t let a turndown from one lender stop your efforts to get credit for your startup. There are many ways available. Using alternative credit sources does not harm your chances of eventually getting credit from a bank or credit union. In fact, it can improve it when they see you handle your money well and pay back balances on time.
Here is a short list of other sources of credit.
It pays to spend time working on your personal and business credit. Having strong business credit can position your startup more favorably for payment terms with suppliers and vendors, and let you enjoy better interest rates and terms from banks, credit unions, and other lenders. Remember, once you have established good personal and business credit, be sure to monitor and safeguard it.