Easy Ways To Build Credit For Your Small Business
One of the common reasons why small businesses often get turned down for loans is that their credit score isn’t good enough. So many small business owners who are locked out of chances for capital, especially minority business owners, end up with bad credit because they have no other options but to run up large amounts of debt before they can pay it back.
Here are some easy ways to begin building your business credit, so you can be ready to take on capital to grow your business in no time!
Apply for an LLC
If you’re a sole proprietor, there’s no legal or financial distinction between you and your business. If your personal credit isn’t great, it’s going to reflect on your business. That being said, most lenders will look at your personal credit too, so you should work on improving both of them. Separating your business’s credit from your personal credit will help jumpstart your progress on building your business’s credit up to be capital-ready!
Also, most banks and lenders prefer that you have an LLC before they offer any credit to you, so getting established as a legal entity is a solid first step in building your business credit.
Open a Business Bank Account and get a Business Credit Card
If you don’t already have a separate bank account for your business (and you really should always have a separation between your personal and business expenses), opening up an account is a great first step to building your business’s credit. It’ll provide data to credit card companies and be a reference for lenders to look at when reviewing your loan application.
You should also get a business credit card - and don’t let it rack up! Getting a credit card and consistently paying off the debt on time is a great way to build up your credit. You can also get in-store credit cards at places where you do a lot of shopping - office supply stores, Costco, those sorts of places.
If you do happen to have quite a bit of credit card debt (as many business owners do), we can help you refinance it into a more manageable interest rate!
Build Relationships with Vendors who Report Credit
You can incorporate building your credit into your business operations, too! If you have a business that requires relationships with vendors, ask your vendors if they allow net terms, so you can purchase items on credit. As you purchase things on credit and pay them off, your vendor partners report your progress to business credit reporting agencies, which affects your credit score.
Get a business website (or improve your current one)
This may seem a bit out of left field, but lenders really do look at your business’s website as a first impression of your business, and having a janky-looking website (or not having one at all) can raise some red flags.
Make sure your website is functional, has proper contact information prominently displayed, is easily navigable, and displays your business’s best face to the world. You can easily build websites yourself using builders like Wix and SquareSpace, which offer templates to make website building even more accessible.
Apply for a small business loan
Borrowing and paying back money on time is one of the best ways to build your business’s credit. Once your credit is to a point where lenders will accept your application, you can apply for loans. You might have to start small at first, maybe only a couple thousand dollars, but as you borrow and pay off more loans, the stronger your credit score will be.
Small businesses can use loan crowdfunding as a way to raise capital and become more credit-worthy in the future. At the very beginning of your credit journey, you can utilize lenders like Kiva, who offer crowdfunded microloans at 0% interest to small businesses who may not have the best of credit. Then, the next step up would be a crowdfunding platform like Honeycomb Credit. While Honeycomb does perform a credit analysis on every business who applies with us, we don’t have as strict of lending restrictions as most banks do.
This means that running a Honeycomb campaign can be a great next step in your credit-building journey, and can open your business up to larger loans from other lenders in the future! Or, larger loans from us in the future, because let’s face it, after running one Honeycomb campaign, you’ll want to come back for more.
Funding your business’s next step shouldn’t be hard
And building up your credit score is just one way to make it easier. When you’re ready to take the next step and grow your business, check out Honeycomb Credit crowdfunded small business loans. Fill out the form below for more information.