How to Build Credit as a Small Business

As a small business owner, you may need to purchase equipment, rent a building or expand your existing operations. If you dont have enough capital to cover the expense, you may need to borrow it from a bank, a savings and loan association or a from a venture capital entity. However, your credit standing within the business world may determine whether you get the loan. As a small business, it is imperative that you build good credit as soon as possible.

Instructions

1

Find a bank that works with new businesses and offers in-house loans. This is as easy as making a list of potential banks and credit bureaus and picking up the phone. Ask to speak with a loan officer in commercial lending. When you reach the correct person, ask whether the bank makes in-house loans to local businesses.

2

Question the commercial loan officer about his banks policy of making unsecured business loans. Many banks offer small, unsecured loans to bank business customers. Find out what the requirements are to qualify for one of these loans. Most banks require that you place your main business account with them and that you maintain a minimum dollar amount in your account.

3

Establish your banking with the lender you feel is the most likely to work with you on building your business credit. Unlike some loans, the bank may never report your payment activity to a credit agency if you take a small loan. However, they will track your payments and use the information to determine whether you are a good risk for a future loan.

4

Open wholesale business accounts with the merchants and suppliers in your line of work. These accounts help you build credit within the business community and you may list them as references when applying for larger loans.

5

Pay back all loans before they are due. This is the quickest way to build business credit. Banks and creditors maintain a detailed list of your monthly payments and whether you make any late payments. If all your payments arrive before the due date, your business credit will increase.

6

Take out an Accounts Receivable Line Of Credit (ARLOC) against billed, but not received, income from services or goods sold. When you open an ARLOC with your bank, you may be required to show copies of client statements in order to borrow money against the amount due. Often the ARLOC acts as a revolving credit account attached to your business checking account and you will borrow and pay the amount needed as you receive payment from the client.

7

Purchase equipment or big ticket items from a supplier on credit. After you establish a little credit with wholesale accounts or a small unsecured loan, you may apply for larger financing. Each time you successfully pay back the money you borrow, your business credit will increase.