Did you know that April was Financial Literacy Month? I was tempted to call it a celebration, but admittedly, “celebration” would have been an overstatement. I understand that most entrepreneurs are more excited about their core business rather than the financial responsibilities like doing the books, filing taxes or financing their businesses—but they are all part of the package and keys to success.
Understanding how business credit works is an important part of the financial literacy you need for when borrowing capital makes sense to help your business grow and thrive. If you’re unsure about how business credit works, we recently hosted a webinar discussing how your business credit profile is created and used by lenders to evaluate your credit.
We also identified five things you can start doing right now to build or maintain a strong business credit profile:
- Make sure your profile is accurate: The credit bureaus like Dun & Bradstreet, Experian and Equifax (the big three) are motivated to maintain accurate information—so they want business owners to review their profiles, and correct any errors.
- Keep your business credit and personal credit separate: The higher balances that often accompany business expenses can hurt your personal credit, and they don’t help you build a strong business credit profile.
- Establish trade accounts with your suppliers: This is a fairly easy way to start making a positive impact on your credit profile. 30- or 60- day payment terms with suppliers can be an important step to build a strong business credit foundation.
- Make sure your suppliers report your good credit behavior: If they don’t report to the bureaus, you may be building a good credit reputation with that particular vendor but aren’t doing anything to build a good credit profile.
- Use the credit you need and stay current: Building a strong credit profile is about demonstrating that you can use the credit you need and stay current with all your credit accounts.
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