Having a good time with a small business owner. The personal credit score is a heavy determinant of whether they are receiving business financing. It’s best practice to keep your business credit and personal credit separated. They are separate entities and graded differently. After all your personal taxes and taxes, your business country are separate right?
To build your business and improve your business, you need to know that your business operations are profitable. The first step to be taken away from personal and business banking. Go to your bank and ask them to open a business banking account. Once you have a business bank account, start channeling all business-related transactions through your business bank account.
Apply for an MCA
Cash Advance Merchant (MCA) is one of the easiest way to make sure you pay back your borrowed amount on time. Fill out this form to find out if you qualify.
As you’re doing this, apply to a private lender for financing so That You can Demonstrate the Ability to repay borrowed money. To prove your business operations is profitable – show an increase in business equity. How to build a business credit history using private lenders.
Table of contents
- 1. Separate business from personal bank accounts
- 2. Borrow using your bank account
- 3. Increase business equity using borrowed money
1. Separate business from personal bank accounts
Your personal credit score is something you build over time. It is representative of your trustworthiness for paying back loans. Whenever you pay your bills or make payments on your personal account, you build personal credit. You can check your credit score with credit reporting agencies, like Equifax or Transunion to find your personal credit score. If you would like to see your business, you can use Billmarket .
Similarly, a business credit score is built by paying business bills and expenses using a business bank account. Once you start using your business bank account to make all business-related transactions, you have proof of business cash flow for financial services providers to assess. The more money that is flowing through your bank account, the higher your borrowing potential with private lenders.
The first step towards building business is to have a business bank account and using it for all business related transactions! This creates a paper trail of your business transactions that financing services companies heavily rely on.
2. Borrow using your bank account
Now that you have proof of your business cash flow, you need to show that you can borrow large amounts of money and pay them back on time. Borrowing and repaying a loan shows that your business is profitable, and has integrity (willingness to do the right thing). Any private financial services provider needs to be reassured that they will not incur any bad debt by lending you money. You provide this confidence by proving that you have borrowed and repaid in full before.
Ensure that the financial services provider reports back to the credit bureaus. You will NOT be building business credit if you are borrowing from the office that you are making your payments on time.
Bull market is a tool that allows you to check your credit score for free. It is available for any Canadian small business to use.
3. Increase business equity using borrowed money
If you’re selling your company, one of the factors determining the selling price of your company is the equity amount. It’s basically what your company is worth. Equity growth can be directly attributed to growth in business. A rapid growth in business equity is called explosive growth . Now imagine that you’re a lender, you see that a business borrowed money, which is followed by a significant increase in business equity. This indicates that you have a solid business operation and are a low-risk borrower. This further increases your business credibility.
If you’re interested in learning more about business equity, we recommend you check out our Financial 101 guide to financial statements . Have a solid understanding of your business financing is an invaluable tool in arsenal.
After you’ve gone through this whole process of business credit, you will be one step closer to lower interest rates. It’s important to keep your credit score healthy. Having low-interest rates directly relates to having a lower cost of capital and higher profits margins. By separating your personal and business accounts you allow clearing your business and personal transactions. Start applying for funding, if you get approved, make sure to pay for your credit score. By increasing your business equity you show that you have a solid business operation that is capable of turning funding into profit. Keep doing this and see your credit score within 6 months! To check your business billmarket.