Updated: Jan 26
Those who know credit will tell you, the best time to build business credit is while you are building your business!
Credit recommendations are based upon a variety of factors, one of which is the age of your company. But the age does not have to define your future credit approvals. Younger businesses have a substantially higher risk for failure simply due to the foolish mistakes all new companies make during their initial experiences. There may be ignorance in youth, but those who learn from their lessons will have a higher rate of success, growth, and credibility.
Building your business credit profile is much like building a house. Oftentimes, more time and money are spent on buying land, approving plans, purchasing permits, lining up contractors, and ordering materials than is actually spent on construction. There is much background work to be done before the first shovelful of dirt can be raised. It can be a grueling process that requires much time and perseverance, but by the time everyone sits down for the first dinner in the completed house, you have long since forgotten those first challenges were forced to endure.
You should never, however, lose a minute of sleep knowing you may have skipped some of the necessary steps in building the foundation that is expected to protect your family into the future.
The foundation of your business credit profile is equally important and requires focus and insight when preparing to support your company’s growth into the future. It is common knowledge that creditors assign risk values to all businesses when they apply for credit. While you may start with smaller lines of credit and somewhat higher interest rates, the payment habits you establish during your early years are going to be the basis for future approvals as you grow and expand in the years to come.
With every positive payment experience added to your D&B credit profile, an exponential decrease in risk can be achieved. As a young business owner, every decrease in risk may mean an increase in approvals, a reduction in interest rates, even higher credit limit recommendations.
Lenders and seasoned business professionals agree, there is still no better means to establishing small business credit and building a strong credit profile for your company than by obtaining retail credit accounts and vendor credit and using company credit cards. Transactions are absolutely transparent. The payment arrangements are generally easy to track and manage. Interest rates are predetermined and outlined in contractual terms.
As a bonus, most credit card companies report on a regular basis to business credit bureaus, which means that the more proactively and responsibly you use the credit lines, the better those payment habits will reflect upon your profile and continue to build your credibility.
Understand that establishing vendor credit and securing small business loans or bank credit will not guarantee success for your business, but it will help you to develop a strong foundation for payment responsibility upon which your company can grow. As you manage your credit profile, you become better equipped for the financial security your business will need in its future.
Companies who offer “flash-in-the-pan” strategies for creditbuilding are not taking into account the risk they place upon your company. By leapfrogging the necessary processes, they weaken the very foundation that you are going to need to rely on in the years to come.
I help young businesses start building a business credit reputation for their company with a solid foundation they can continue to grow into their future. I assist young businesses to manage the data reflected in their D&B profile, and to open new doors by registering to do work or receive loans and grants from the federal government.
The opportunities for growth and achievement are boundless for small business owners, whether they have weathered the storms of time and trial or are just starting to get their shingles wet.
LESSON: Establishing retail credit accounts will add validity to your file, which can be a benefit when you are ready to apply for other types of credit and funding. This can potentially allow your company to obtain higher approval amounts than many long-established businesses who have neglected to effectively maintain their credit profiles over the years.
CLICK HERE to schedule a free one-on-one business credit consultation.