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 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!
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Make your money do more.
Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.
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.
A good score would lie somewhere between 100-80. You can build business credit by paying your bills on time or 30 days early.
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.