Building a business from the ground up takes considerable work, and entrepreneurs have to use limited resources strategically during the first phase of their development. Having good credit can be an extremely valuable resource for a small business, but establishing positive credit may prove to be challenging. Here are a few ways that you can work towards generating a healthy score for your new small business.

Establish a Business Entity

The first thing that you need to do to get a business credit score is register a business entity. File the appropriate documents with your state and apply for a federal tax number. All of the transactions that you carry out on behalf of the business should fall under the name and financial responsibility of the entity.

Strengthen Personal Credit

Prospective lenders may look to the individual consumer credit standing of a business’ principals. When a young business has not yet had a chance to demonstrate its financial management abilities, the credit history of the owners and partners responsible for a business’ day-to-day operations may shed light on an enterprise’s creditworthiness. Make it a point to monitor your individual credit with regularity, and take steps aimed to address issues on a report that could be having a negative impact on your score.  

Get More Than One Credit Account

Having more than one business credit card may be a smart move. Having more than one card can raise your total credit limit and thereby raise your score. Multiple accounts may also be an effective tactic to boost your credit utilization ratio, but you still have to be attentive to your utilization ratio for each individual card rather than your total available credit. With several tradelines factoring into your business credit score, you can show potential funders that you are able to meet numerous payment obligations consistently.

Avoid Late Payments

Making multiple late payments on credit accounts or loan agreements can have a deleterious effect on a business’ score. Build some rainy day fund contingency into your operating budget. With a liquid rainy day fund, you can continue meeting ongoing obligations if there is an interruption to your revenue.  

Having a good credit score can make it easier for businesses to get loans, finance equipment, and lease operating space. Without a good score working in their favor, access to these basic operational necessities may be a lot more expensive or simply impossible. It is imperative that developing small businesses assign appropriate priority to this key asset.