5 Ways To Build Credit To Qualify for Better Business Loans
Growing a business often involves securing the right funding, but that can be a challenge without a solid credit profile. Strengthen your credit to open doors to better loan opportunities, lower interest rates, and more flexible terms! If you’re looking for ways to improve your credit and qualify for the funding your business deserves, these strategies can help.
Separate Personal and Business Finances
Mixing your business and personal finances creates confusion and limits your ability to build a distinct credit profile for your business. Start by opening a dedicated business bank account and applying for a business credit card.
Use these accounts for all business-related expenses, ensuring they reflect accurate, professional activity. This separation establishes your business as an independent entity and contributes to an organized financial foundation.
Manage Payments Wisely
Pay your bills on time! It’s a straightforward yet powerful way to boost credit. Creditors report payment activity regularly, making late payments a red flag for lenders.
Prioritize setting up automated payments or clear reminders to stay on top of due dates. Consistent, timely payments establish your business as reliable and demonstrate that you can handle loans responsibly.
Establish Relationships with Suppliers
Build up your credit score by working with vendors who report payment histories to credit bureaus. Many suppliers offer payment terms that allow businesses to buy now and pay later.
When you honor these agreements, those positive payment records can boost your credit. Reach out to suppliers, confirm their reporting practices, and begin building those relationships.
Watch Credit Utilization
Using too much of your available credit can hurt your score, even if payments are made promptly. Aim to keep balances below 30 percent of your credit limit.
For example, if your business credit card limit is $10,000, maintaining a balance under $3,000 keeps your utilization rate healthy. Keep your credit usage low to show lenders you manage resources effectively.
Work with Alternative Lenders
Traditional banks aren’t your only option for funding. Many alternative lenders take a more flexible approach when evaluating creditworthiness, focusing on factors like cash flow or business performance.
Work with these lenders to open opportunities to demonstrate repayment ability on loans or credit lines. Securing small business capital funding from such lenders can be both a stepping stone and a credit-building opportunity.
Building credit takes time and effort, but the payoff is significant when qualifying for better business loans. Stay proactive and strategic about these efforts, and you’ll create a strong foundation to access ideal funding options when your business needs it most.
Curious about alternative lending or funding options for your business? Use Pango Financial’s funding solutions tool as a resource while you build up valuable credit.