How To Build Your Business’ Credit Quickly

Want to build your business’ credit quickly and efficiently? Follow the steps below and you’ll be enabled to a range of funding.

Throughout this blog, we will be sharing our tips and tricks that if followed, will enable your business to funding and the best interest rates from lenders.

Building your business’ credit plays a crucial role in your company’s funding ability. Whether you operate as a sole trader, LLP or incorporated company, your business has the capability to establish a credit file separate from you as an individual person.

If you operate as a sole trader, it’s important to understand there is no legal or financial separation between you and your business. If that’s the case, when you apply for funding, all activity will be solely tied to you as an individual and reflected on your personal credit reports.

Covid credit score care

There is now extra pressure, now more than ever, to keep on top of maintaining a healthy credit score for your business. Many businesses of recent years have found themselves in need of loans due to the knock-on-effects from multiple lockdowns. So, should your business be put in the position of requiring a loan, in order to keep your business afloat, it is key to care for your credit score.  Not to mention- checking your company’s credit score should be a standard procedure to identify any potential fraudulent activities made to your business’ accounts. Further to this, unfortunately, according to statistics, fraudulent activity has propelled significantly during the pandemic. So catching this any signs of this early can make all the difference before too much injury is made.

5 simple steps

To keep your business and personal finances separate, the first step is to start building credit in your company’s name. If you want to build business credit quickly here are five simple steps:

Step 1 – Choose the Right Business Structure

Making your business a distinct legal entity requires you to select a business structure such as a Limited (incorporated) company, for example.

Once you form your business entity, the next step is to register your business with companies house. This particular step is dependent on your structure and where your business is located. Like many new businesses, your primary address might be in the name of your accountants address. As a first step towards healthy credit, this address will need to be moved to the premises of the business.

Step 2 – Obtain a business registration number.

When setting up the new business as a Limited company you will receive a company registration number from Companies House. This is an eight-digit number assigned to your company. This you will use for things such as filing company tax returns, opening a business bank account, applying for licenses and permits, and applying for business credit.

Step 3 – Open a Business Bank Account

Once you have your registration number, you’ll want to open a business bank account for your company. This is a mandatory step in creating a clear separation between your business and personal expenses.

Your banking relationships plays an important role in your company’s funding potential. Not only does your business bank account serve as a bank reference on credit applications, but it also provides key data that lenders use during any funding review.

Step 4 – Establish Credit with Vendors/Suppliers Who Report

One of the easiest ways to build business credit score is to apply for net terms with vendors and suppliers. As you buy supplies, inventory, or other materials on credit, those purchases and payments get reported to business credit reporting agencies such as Experian or Dun & Bradstreet.

This activity creates your company credit profile and business credit report. After your company has several credit lines reporting, a business credit rating (score) is generated.

Remember, it’s important to select vendors and suppliers that report to a business credit reporting agency. Each relationship you have also serves as a trade reference that can be used on future credit applications.

Step 5 – Monitor Your Business Credit Reports

There are a few business credit reporting agencies so it’s important to monitor each of your company credit files. Each agency collects data from various sources and may have different information about your company.

The good news is each of the business credit agencies provide a way for you to update basic information about your business. If you uncover any outdated or incorrect information, you’ll want to contact the agency to make the appropriate change.

With an established business credit report, it is probable that you will get higher credit approvals. Not only this, but better interest rates and repayment terms on loans and lines of credit.

It’s equally important to establish a diversity of accounts. This can be done with other types of business credit such as a business credit card or line of credit. Let these five simple steps serve as a starting point to building business credit for your company.

WestWon offers leasing arrangements for all types of businesses, from new starts to well established businesses. To find out how we can help you, please give us a call on 01494 611 456 or email hello@westwon.co.uk.