All You’ve Wanted to Know About Establishing a Business Line of Credit
Establishing business lines of credit is important when you’re trying to grow a new company. You can’t always get the equipment and material you need without a little extra help. When you’re just starting out, it may take a little time to establish a credit history. But with some patience and by following some key practices, you should have no trouble establishing credit.
The first step is to register with the various business credit agencies such as Equifax, Experian, and Dunn & Bradstreet. If you handle your money wisely, you will begin to accrue positive reports. This reflects well on you and is an important consideration for any company that provides business lines of credit.
Also, make sure your bank account always has a positive balance with consistent minimum balances and deposits, and that you avoid any negative occurrences such as overdrawing your account. If possible, establish a positive relationship with the branch manager of the bank or the business banker. A professional relationship with someone from the bank is an important step to establishing credit for your company.
Complete applications for credit cards and cell phones, as this helps to establish credit. When possible, choose to be billed by vendors for materials that your company uses. If possible, get the vendor to extend a net 30 payment schedule, which means that you will pay the balance within 30 days. This is, in effect, a loan to your company. Make sure to pay it back on time! This will reflect well on your ability to handle credit.
A business plan is also an important way to show companies that extend business lines of credit that you are a good candidate. Having a plan shows that you are professional and illustrates exactly why you should receive the credit line.
Finally, when you have all of these elements in place, set up a meeting with your business banker and make an application for a line of credit. Have any necessary paperwork with you, including your business plan, and any billings you have established. Your bank history and credit reports will already be available to the banker. Make sure to highlight any high credit scores you may have attained personally to highlight your ability to stay within a budget and make payments on time.
At first, you may be extended a smaller credit line, but this is okay! Over time, you can request credit increases as your positive history grows. Even if you don’t think you need it, having a larger credit line will ensure that you have the money available to grow your business when you need it.