How to Build Business Credit and Protect Your Cash Flow
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How to Build Business Credit and Protect Your Cash Flow


If you’re like most small business owners, you don’t wait for things to happen–you make things happen. From staying on top of invoicing to perfecting pricing to managing inventory, you bust your tail every day to make the numbers work.

But without fail, issues beyond your control always seem to pop up and create havoc on your cash flow. So what can you do to protect yourself?

It’s easier than you think…build strong business credit. When done right, it opens doors to financing and commercial relationships that ensure you have cash when you need it most.

Here’s how to build business credit like a boss.

Put your business on the map

If you haven’t already, you’ll need to make sure lenders and suppliers can validate that your business is legitimate. Here’s a quick checklist:

  1. Set up a legal business entity, such as a corporation or LLC. Check with your            accountant to see what legal structure works best for you.
  2. Establish a business tax ID number (EIN). You can apply through the IRS website. Don’t worry, it’s usually a quick and painless process.
  3. Open a business bank account. Don’t be afraid to shop around. You’ll likely be doing business with your banker for a long time. Find someone with a good reputation for working with businesses like yours.

Get listed with the business credit bureaus

Once your business is properly established, you’ll need to check if it’s listed with Dun & Bradstreet. D&B is one of the main business credit bureaus.

They assign businesses with a credit file number (DUNS) and creates its own credit score (Paydex) based on information reported by your creditors.  If you don’t have a DUNS number, you can create one for free.

You’ll also want to make sure all business information in your DUNS file is accurate. Errors here can raise red flags and negatively affect your business credit scores.

Don’t take this for granted! A Wall Street Journal survey revealed that 25% of small business owners found errors on their business credit reports that put their business in a riskier category.

Also, know that D&B isn’t the only business credit bureau out there. Experian and Equifax report on business credit too. It’s a good idea to check all of these reports. Your lenders, suppliers, customers or competition could use any one of them to judge your business.

Get credit for your good credit

If you’ve been using personal credit cards or other personal funds to run your business, stop. Once your business is listed with the bureaus, you’ll want to start using credit that links to your business profile. You can do this in a few ways:

  • Apply for a business credit card. Use it for business expenses that you know you can pay off quickly. Cards usually charge high interest rates that are cash flow killers, and high balances can hurt your business credit scores.
  • Get credit from your suppliers. Set up corporate accounts with the companies you buy from consistently (Staples, UPS, etc.) and apply for a line of credit.
  • Ask for trade references from business office services. This includes your business cell phone, internet, and web hosting. These relationships should show on your company’s credit file.

Be aware: Just because a company provides you business credit, doesn’t mean it automatically shows up on your reports. Ask each creditor to verify they send your payment history to the credit bureaus.

Also, it goes without saying, but as you open credit accounts, you’ll need to use them wisely. That means paying bills on time–or early! Business credit works a little differently than personal credit. For instance, in order to get a perfect D& B Paydex score, you’ll need to make payments 30 days before terms!

Use your good credit to pad cash flow

As you build your business credit, vendors will be more willing to bet on you. Take advantage of this by asking for better payment terms. Could your business benefit from having  net-30, net-60 or even net-90 day terms?

You’ll also want to talk to your lender about opening a line of credit. Use this to protect yourself from cash flow surprises or to pay down higher interest debt, like business credit cards.

Sometimes, running a small business can feel like you’re on a rollercoaster. Using your strong business credit can smooth out the downturns and let you enjoy the ride–regardless of what comes next.

About the Author:

Jared Proctor is the Content Manager at Creditera, an online platform that helps small business owners thrive by providing transparency and guidance on their business credit.

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