How to Build Your Business Credit

Having strong business credit is critical for your business and its growth—perhaps now more than ever. Whether you’re ready to take your business to the next level, or are still getting back on track amidst the COVID-19 pandemic, you’ll likely need to make some form of an investment.

For example, maybe you’re planning to invest in a new product or expand your team, or you’re pivoting your business to meet reopening guidelines and other “new normal” expectations. Whatever the case may be, you likely need financing to cover such investments. 

To get funding, you need to prove your creditworthiness, and one way to do that is with a strong business credit profile. In a nutshell, your business credit profile shows lenders how likely you are to make repayment obligations in full and on time. If you haven’t yet established your business credit or if you want to make your existing score even stronger, follow these simple steps:

1. Incorporate your business

First things first: you need to incorporate your business. By definition, this means establishing your business as a legal business entity and officially separating your business assets from you, its owner. Three common types of business corporations include C-corps, S-corps, and Limited Liability Corporations (LLC). 

When you establish your business as one of these, you’ll get articles of incorporation, a Federal EIN (or employer identification number), and a host of other benefits. For example, you give your business added legitimacy, your personal assets will be protected in the event of a lawsuit against your company, and you can open a business bank account—which leads us to our next tip…

2. Open a business bank account

Keeping your business finances separate from your personal finances is important for a number of reasons. For one thing, you won’t have to spend hours combing through financial statements to separate business transactions from personal ones. Plus, you’ll be taking another step toward building business credit.

A business checking account alone isn’t going to build business credit. But opening the account (and having the right business incorporation to do so) signals to the credit bureaus that your business is ready for a credit profile. Plus, you can use this business checking account to make payments on actual credit accounts that directly impact your business credit.

If you don’t already have a business checking account, there are a number of factors to consider in a business checking provider—things like fee structure, balance requirements, interest, available financing options, whether it’s an online bank, etc. When we surveyed over 800 small businesses earlier this year, we learned that you want transparency and flexibility from your banking services—so we built a business checking solution that offers just that, and more.

BlueVine Business Checking is the only checking account built specifically for small businesses. You won’t have to pay any monthly or hidden fees, or worry about balance requirements or transaction limits. What’s more, you’ll earn 1.00% interest. And, of course, you’ll be able to track and manage all your business transactions in one place.

3. Establish a line of credit

To build credit, you need to get credit—and then make payments in full and on time to show the business credit bureaus that you are a responsible lendee. A great place to start is by opening a risk-free line of credit from a lender like BlueVine.

With the BlueVine Business Line of Credit, you’ll have access to up to $250,000, draw whatever you need, when you need it, and pay only for what you use. When you use the line of credit responsibly (i.e. you meet your payment obligations), the credit bureaus will reward you with a strong business credit rating.

So why a line of credit over, say, a credit card? While these two financing options are similar, lines of credit tend to offer more flexibility and opportunity for small business owners. For example:

  • Fees: BlueVine’s Business Line of Credit has no maintenance fees, while many business credit cards charge annual fees. 
  • Credit Limit: The actual credit amount tends to be higher for a line of credit than a credit card. 
  • Cash: Having a line of credit means having access to actual cash that you can deposit into your business checking account. This can be especially helpful if you haven’t gone cashless in your business and need to make a cash payment to a vendor, for example.

All in all, lines of credit offer businesses peace of mind. They’re a safety net of cash for surprise growth opportunities and unexpected expenses—and they can help you build business credit. To learn more about BlueVine’s Business Line of Credit, visit www.bluevine.com/line-of-credit

4. Pay bills on time

Payments on a line of credit, credit card, or other funding source aren’t the only metrics that credit bureaus track. They might also get payment history from your vendors or other accounts. To help streamline the bill paying process with everyone from your supplier to your utility companies, you can set up online payments with BlueVine.

BlueVine Payments lets you pay all your vendors and other bills from one place using whichever payment method you choose. Select check, ACH, or ePayment for a cash payment, or use an existing credit card (and continue earning points and rewards on purchases). To ensure you never miss or make a late payment, you can set up one-time, recurring, and scheduled payments. Learn more at www.bluevine.com/payments.

Next steps for your business credit

At the end of the day, business credit can help further legitimize your business and give you more opportunities for growth. There are a variety of ways to build business credit and BlueVine is dedicated to helping you get there—especially as you get back to business. Learn more at www.bluevine.com.

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Disclaimer

The information, opinions, and advice in this blog post are provided for educational purposes only, and do not necessarily state or reflect those of BlueVine and/or its partners, including The Bancorp Bank and Celtic Bank. Neither BlueVine nor its partners are responsible for the accuracy of any content provided by author(s) or contributor(s). For information about BlueVine products and services, please visit the BlueVine FAQ page.