For a start-up or growing business, having a good credit rating is extremely helpful in obtaining financing for small businesses, especially when a business is relatively new. Aspiring entrepreneurs generally offer good ideas or venture into an industry in which they already have experience. However, in many cases they may not be aware of how the small business financing process works. In fact, they can be so focused on setting up the company that they are pushing back what is often the most important success factor: the ability to get enough money to get the project up and running. .
Ways to Increase Your Credit Score
Before applying for financing for a small business, here are some tips for increasing your credit score:
Checking Your Credit Report – Requesting a free copy of your credit report from companies such as FreeCreditReport.com ] Equifax and Experian . Make sure it contains no errors. For example, if there have been tax liens that were settled months ago, make sure that the final settlement is reflected in your credit report. Look to see if there are late payment records and try to pay them in order to get the imperfections of your account.
Opening a Business Credit Card – Having a professional credit card gives credibility to a business. The best way for a young business to establish a good credit is perhaps to open a business credit card and make small purchases using it – even if you have the same credit card. money to cover the costs. Then, at the end of the month, pay the bill on time and in full. Capital One was aggressive in pursuing small businesses to open credit cards. They will start with a small limit and repayment options. Do it for a number of months to establish a timely payment history. This process will help you demonstrate your credit worthiness when you want to get more financing for projects like real estate buying, building renovation, equipment and inventory, as well as others. costs associated with the growth of a business.
Set up payment reminders on your calendar and pay bills online – Making credit payments timely is among the most effective ways to increase your credit score. You can set reminders on Microsoft Office Outlook or another desktop calendar or on your mobile device. Banks and creditors also frequently offer SMS or e-mail payment reminders as a reminder when payment is due. In addition, you can set up automatic payments via your professional bank account or credit card. This will ensure timely payments. (Just make sure you have enough money in your business bank account to cover the payment. If you go into the overdraft, it will defeat the purpose and then hurt your credit score.)
Pay off existing debts when it is possible, but do NOT Close account when it is fully paid – Obviously, in the first phase of a company's history, paying off existing debts is easier said than done. However, reducing the amount owed and the use of the credit (the percentage of available credit that has already been used) will help tremendously to improve your credit score. When determining which ones to pay first, look at the interest charges and repay those who have the highest finance charges first. If you have finished paying a furniture store for desks and chairs and do not plan to need it for a while, you just have to remove the card. Do not close the card. The reason is that you will have a lower credit utilization percentage if the account is open but has a zero balance.
Increasing your credit score can help you get traditional bank term loans or SBA financing which is very helpful for new businesses – especially for startups and businesses owned by women and minorities. Bank loans and SBA loans will likely offer the best interest rates and conditions for entrepreneurs looking to pursue their business goals.
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