Empower Your Small Business: Strategies to Build a Strong Credit Score

Small businesses need access to credit to expand business and operations, hire staff and technology, expand one's client base, etc. However, in today's world, getting access to credit is possible only when a person has a good credit score. If you didn't know already, like individuals have credit scores, businesses also have credit scores. Here are a few simple tips on what one can do to improve a small business credit score and increase their chances of availing of a loan on the most beneficial loan terms and conditions.

1. Maintain a Separate Business Account: Many business owners make the mistake of using their credit cards and accounts to borrow money to take care of expenses related to their business. This is a mistake that people should never make. If you own a small business, the first thing you must do is apply for a business account and business credit card. Doing this will not only allow people around you that you are working with to take you more seriously as a business but also ensure that all transactions happening under the business account add to your business's credit score and not yours. 

2. Use Your Business Credit Card Wisely: If you wish to build your business's credit score, yet another simple thing you must do is use your credit card wisely. Do not overspend. If you do make big purchases and pay from your credit card, clear the entire amount due before the next due date. Maintain a low credit utilization ratio. Ideally, your credit utilization ratio must not exceed 30%. Doing this will help you build a strong credit rating for your business. 

3. Check Your Business's Credit Report from Time to Time: Business owners must also check their business's credit report from time to time. This is crucial to understand what is causing one's credit score to go down and take steps accordingly. One must also check their credit report for errors for misinformation can cause a business's credit score to go down considerably. Therefore, errors must be spotted and reported as soon as possible. 

4. Apply for a Small Loan and Pay it Off Quickly: If yours is a new business with no credit history, then an easy way to build a good credit score is to avail your business of a small loan and then repay this loan without making any mistakes. This will help you build a good credit score to start with.

5. Maintain a Low Debt-to-Income Ratio: Businesses that depend excessively on credit are seen as high-risk borrowers by credit information agencies. Such businesses have low credit scores and do not get access to credit easily. So, all businesses must maintain a low debt-to-income ratio. Borrow when absolutely necessary and borrow what you can repay. 

These simple tips are easy to follow and will help you build a strong credit score.