Business Credit Card Tips

Business credit helps a business to borrow money which can then be utilized to buy goods or services. It’s all about the trust which payment will eventually be made on time. So, why establish business credit anyway?

For many business owners, establishing a separate legal entity such as a limited liability corporation or an LLC gives them the unique power to create a legal credit profile with business credit reporting bureaus, and these agencies are always willing to help. The business credit profile established with business credit bureaus provides business owners the power and knowledge to get loans or credit cards from other business entities. They also have a separate identity when it comes to their personal credit history and credit score. So how does one establish business credit with these agencies? Here are some of the main ways:

Obtain startup financing through suppliers or vendors. Businesses that are in need of funding may seek the help of existing vendors to obtain startup financing. The suppliers or vendors usually report to credit bureaus that provide business credit and they’re the ones who decide if the business gets its business credit card. So when you approach a vendor for startup financing, make sure that you’ve already established business credit with one of these agencies to show your lenders that you have the capacity to pay back the startup financing.

Get approved for small business loans and merchant cash advances from banks, credit unions, and non-traditional lenders. Lenders may pull your credit reports when they’re doing a business credit check to determine if you’re really worthy of their financing program. When you get approved for a business loan or merchant cash advance, this will get reflected on your personal credit reports too, making it easier for you to get approved for additional financing in the future, and at better interest rates. Even if you don’t get approved for financing, your credit report will still reflect that you did get approved, which can be beneficial in other forms of lending or even applying for a job.

Work with your vendors to build good business credit card profiles. When you use your card for purchases, the vendors report the transaction to the credit bureaus.  These bureaus then report your payment activity to the three main credit agencies. If you consistently use your card to make purchases at quality vendors, your vendors will want to provide you with business credit cards to establish themselves as good business credit card customers.

Avoid getting hit by negative items on your business credit report. Your scores might drop because you have unpaid debts, or because you didn’t pay your outstanding bills on time. You should also avoid having liens filed against you because this is viewed negatively by the credit bureaus. When a lien is placed against you, it shows up on your business credit report. The longer the time that a lien remains on your report, the worse your scores will become. Liens are a great way for companies and people to build their credit history, but they shouldn’t be a primary focus of your business credit bureaus.

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