Building good credit for your startup can be a serious chore – it’s not like you already have enough going on, especially if you are starting up your company on a shoestring budget. Indeed, the road to good credit can be long and windy, because you may be asking for a lot of grace periods on your loans and lines of credit. When it comes down to it, the credit card industry isn’t often lenient to small and startup businesses that don’t have the capital to pay bills at the end of the month. Plus, you need that credit to build credit. Here is how to build and maintain good credit for your startup.
Your first step is to not go in over your head. You don’t want to sign up for five different credit cards and you don’t want to take loans out at banks all over town. Ideally, you want to take one line of credit – or two, depending on what industry you are in – and a credit card. This will allow you to easily pay your bills on time – and it will allow you to pay back loans. The last thing you want is to incur interest, but you also don’t want to go into the red – it could negatively affect your credit.
Next, you want to make sure you stay on top of your finances like a hawk. Credit is important, because it is the gold standard to determine whether you will pay back a loan on a time. A financial institution won’t give a loan to just anybody – or any business. If you can show that you are diligent about paying back your loans, you will have a much better chance of getting approved. When it comes down to it, staying on top of your finances will ensure that you have enough backup capital to cover your outstanding balances.
Another way to maintain good credit is to find the right business credit card. You don’t want to get a card with too large of a maximum because it could entice your company to spend more than it has. Moreover, you want to find a credit card that matches your businesses spending habits. For instance, if your business sends people out to other offices or cities, you probably want to get a credit card that gives you bonuses and other perks, like miles, upgrades and more. When it comes to credit, you want to find a credit card that will work synergistically with your spending trends.
Lastly, it is important to know that your business won’t be bestowed with good credit right out of the box. In fact, you may not have any credit to start out with. This is what they call a “thin file.” It is the reason why you want to start developing and building credit right out of the gate – because if you have big plans in your business proposal, you want to have the credit to accomplish those goals. In the end, pursuing good credit should be just as important as pursuing a healthy profit margin, so you should be focusing your startup efforts in both directions.
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