How To Build Business Credit In Canada

How to Build Business Credit in Canada

If you’re running a business, you should know by then how important it is to build business credit. It doesn’t matter if you’re running a well-established company or a startup; your business will always go through financial issues.

Good business credit will be your friend. It will give you access to capital when needed and allows your business to grow. But what is business credit and how does it work?

What is business credit?

What exactly is business credit? A business credit shows your ability to borrow and pay on time. When you’re applying for capital or financing, this credit comes into the spotlight. It indicates whether your business is reliable or risky regarding repayments.

You have to ensure that you know how to build business credit because lenders take it into consideration. So, building business credit is super important if you want to get the green light for those much-needed funds!

Why build business credit?

Knowing how to build business credit brings along a bunch of awesome perks. Firstly, it increases your chances of getting business loans.  Plus, the best part is, with a good credit score, you stand a better chance of scoring lower interest rates on those loans – saving you some sweet cash.

A good business credit also improves the financial stability of your startup. To achieve this credit greatness, it all boils down to consistent good financial habits. You’ll have to budget your finances and be consistent with it, resulting in a financially stable startup.

And here’s the icing on the cake – suppliers and lenders will love you! If lenders like you, they may give you better prices, repayment options, and loan terms.

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How to build business credit in Canada

Knowing how to build business credit in Canada is doable, and there are a bunch of ways to go about it.  With patience and smart financial moves, you’ll be well on your way to that enviable good business credit score in no time.

1. Open a business bank account

One of the biggest steps to building business credit is opening a business bank account. When you’re ready to apply for a loan or financing, your bank reference will show lenders that you have a solid relationship with a bank and can handle financial matters responsibly.

Therefore, you should open a business bank account during the early stages of your startup.

Your bank account should be active for two years. During those years, you can work on maintaining a healthy average daily balance and smooth cash flow. The longer your good business credit history is, the more confident your lenders will be about your business.

2. Pay bills on time

Late payments can worsen your credit score. A few days of late payments have huge consequences, so always be on top of repayments. Meanwhile, you get to improve your business credit score by paying bills in a timely manner.

You can ask your bank if they’re giving an account of your good payment history to business credit bureaus. If not, your credit report will remain unaffected.

3. Register your business

It’s crucial to register your business before you apply for loans. Banks will check if your business is legitimate. Your company will be seen as a red flag if it’s not permitted to operate in Canada.

Registering your business also shows that you’re a responsible business owner; you’re committed to following the rules. If you’re not trustworthy in complying with the law, which lender will trust your ability to pay loans back? Therefore, don’t delay in registering your business.

4. Put your business on the map

Lenders have high confidence in fully established companies. Therefore, you should boost your brand. You can put your business on the map and list a business phone number in your local directory. You may set up your business’s website as well. All these prove that you’re indeed taking your business seriously.

5. Expand your credit portfolio

Ensure that you expand your credit portfolio by applying for a business loan or line of credit. This shows lenders that your business is creditworthy.

You must build a business credit history as soon as possible. You have to do things the right way in the beginning. When the time comes for business expansion and you need more loans and funds, your good credit history will save the day.

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6. Be on top of your taxes

Make sure you comply with the law by filing business taxes on time. If you don’t comply, your business credit will suffer. You must file returns and pay what you owe on time. If you find yourself dealing with tax payment issues, you should ask tax experts for advice.

7. Have a good relationship with suppliers and vendors

When you have a good relationship with vendors and suppliers, you get to avoid paying upfront for services or products. Also, make sure that your vendor or supplier is reporting your payments to credit bureaus. If they don’t, it will not affect your business credit.

Final thoughts on how to build business credit

A strong business credit will help you build your start-up. You can follow everything above to build business credit. Just make sure that you take ownership and responsibility in running your business.

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FAQs about how to build business credit in Canada

Can you build business credit in 2 months?

You can build a good business credit in a few months, but the longest it can take you is a year. If you want to build business credit fast, you'll have to make sure you do all the right things. That means registering your business with the correct credit agencies, paying bills on time, and the like.

What is a good credit score for a business?

A good score would lie somewhere between 100-80. You can build business credit by paying your bills on time or 30 days early.

What is the lowest business credit score?

A bad score would be somewhere between 49-1. This usually happens when your payments come beyond terms or between 60 to over 120 days. If this is your situation, you must make every effort to build business credit and work your way up.

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August 19, 2023
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