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How to Up Your Business Credit Game as a Startup Founder

Business credit is a valuable asset for a startup. Credit lines open many opportunities, enabling entrepreneurs to get easy access to loans and funds. With good financing, they can buy necessary inventory and equipment, launch marketing campaigns, hire employees, and keep cash flow steady during the initial phase.

According to Crunchbase statistics, global early-stage funding crossed $201 billion invested in 8,000 companies in 2021. That was almost double of the $101 billion funded to more than 6,500 companies in 2020. The numbers continue to grow. They also show the significance of good business credit because lenders consider it as the primary lending criterion.

Building strong credit is worth the effort for entrepreneurs, but it requires strategic planning and wise financial moves. There are no shortcuts to credit consolidation, specifically for startups yet to establish their credibility in the market.

Here are a few strategies to up your startup’s credit game as an entrepreneur:

Build a Strong Foundation

Building a strong foundation is vital for startups because it is the cornerstone of credibility. The stronger your foundation, the faster you can build your credit as a budding startup. Take the time to ensure that your business appears professional to lenders, clients, and partners. Implement steps such as getting a business phone number, using a professional email address, and creating a website.

eCredable notes that startups can become relatively creditworthy in a year by investing in a robust base and following best financial practices. At this point, you need to have realistic expectations because boosting your credit may take some more time in unforeseen situations. Commit to clean money habits to stay on the right track.

Get the Basics Right

Setting up a foundation is a good start, but you need to make the next moves wisely. Get the basics right to consolidate your credit score as a startup. The following steps will get you on the road to creditworthiness:

  • Register your business as an LLC, S-Corp, or relevant entity according to the current size and long-term goals
  • Get an Employer Identification Number (EIN) from the IRS
  • Get a DUNS number to enable potential creditors to track your payment history
  • Open your business credit file with Dun & Bradstreet, Experian, and Equifax

With these basics in place, you are all set to build the credit history of your startup.

Get the Right Accounts

The credit report of a business depends on the information on how it pays its bills. When you show a good payment history, credit agencies and lenders see you as a good prospect. For startups, creating a good history is critical as it helps them with proof for borrowing down the road. You can do it by getting accounts that eventually report to business credit bureaus.

Not all companies report so you must pick at least a few credit accounts with ones that do it. Here are a few examples:

  • Business loans and financing
  • Business credit cards
  • Suppliers and vendors
  • Credit builder accounts

Pay on Time

According to surveys, credit card debts are at an all-time high in the US. The last thing an entrepreneur wants is to be a part of these statistics. Missing out on your payment can damage your credit score even if you pay only a day or two late. It is something you should be cautious about from the startup stage and follow rigorously even as your business grows.

Paying your bills on time can help you strengthen your business credit score more quickly. Additionally, it can save you from painful penalties that can hurt your startup business. Set reminders, automate payments, and manage your cards diligently to ensure timely payments.

Monitor Your Credit

You cannot take a set-and-forget approach to business credit because things may go downhill unexpectedly. Commit to diligently monitoring your business credit history over the years. Besides helping you monitor your progress, it enables you to spot errors. If you find one, report it immediately to the credit bureau and get it addressed.

Maintain good financial practices in your startup to stay ahead of your credit score goals. If your accounts do not seem to help your scores enough, consider adding additional credit references for an extra boost to your startup credit.

Summing Up

Successful startups require a solid credit score to become reputable borrowers. Without a good score, you may not get funding easily. Even if you manage to convince lenders, they may charge exorbitant interest rates on loans. Building your business credit early can open the doors to growth for your startup. Fortunately, these simple steps can give you a head start with credit building and maintenance.