5 Ways to Get Credit for Your Business

Did you know business credit can be just as important as having personal credit?

It’s essential for small businesses to get credit so they can have access to the financing needed to cover any unforeseen expenses, manage cash flow and grow. In fact, studies have shown that over 65% off all business owners use credit for business purchases. 

Now building business credit may seem like an intimidating process – especially if your company is a startup. But the good news is it’s not.

The process of getting credit for your business is not that different to building your own personal credit, only you do it in your company’s name using its tax identification number not your social security number.

Here are five ways to get credit for your business:

1) Get Payment Terms from Suppliers – If you’re an established business you can most likely get payment terms from suppliers.  While suppliers may use various tools to decide whether to extend credit to your business, the most common way is to check your business credit report with agencies such as Dun & Bradstreet.

As a startup with little to no credit history, the best way to improve your chances of getting credit from a supplier is to become a good-paying business customer.  Once approved, credit arrangements are usually on net-30 or net 60-day terms. With supplier based credit you can buy products or services while paying for them at later date.

2) Apply for a Business Credit Card – A business credit card is the quickest way to build credit history for your business. It helps keep personal and business purchases separate while providing the flexibility, control and convenience needed to manage the company’s finances.

Before you apply it’s important to check your personal credit ratings because a card issuer will evaluate your application for a company credit card based on this information. Although you will supply your company’s business tax identification number, your business is still required to provide a personal guarantor on its behalf.

3) Open a Service Agreement for your Company – When you enter into a service agreement with a service provider it’s in fact a credit arrangement. You receive a service with the agreement that your company will pay for the service every month. A company cell phone, internet service or web hosting are all examples of credit arrangements that your business can enter.

4) Open a Secured Business Credit Card – If a poor credit rating is preventing you from getting unsecured business credit then consider opening a secured business credit card. A secured company card is financing that is protected by an asset.  Basically, you are providing ""security"" in the form of a cash deposit that your credit line will be repaid according to the agreed terms and conditions.

Keep in mind the card issuer will periodically review your account for an opportunity to upgrade to an unsecured business credit card. Your business may become eligible if it manages its account responsibly.

5) Apply for a Retail Credit Account – Retailers offering office supplies, computers, building supplies, electronics, etc. offer revolving store credit accounts for business customers. This type of credit can be used at all the retailer’s locations giving your company the purchasing power it needs to grow. This will help establish additional trade references for the business which may be used on future credit applications.

As you get credit for your business and make timely payments to creditors and suppliers you build trade references which become an asset to the business.  Did you know a typical business credit application will ask for three trade references?  Banks and alternative lenders that lend money and extend credit rely on credit checks and trade references in their decision-making process.

As your company grows, having access to credit is a must.  By building a strong business credit report you can receive more favorable rates and terms giving your business optimal use of its funding ability.