Lending conditions remain tight
Banks and financial lenders don’t just give money to anyone these days, and in recent years, have become even stricter in their underwriting and lending. The businesses most likely to be approved for funding are those that have great credit and have a proven history of it.
Of course some businesses are A+ students at this, while others have faced some obstacles in the past that have marred their business credit; fortunately there are actions you can take to build your business credit again.
Sign up for a business tax ID number
First you will need to get an EIN and a D-U-N-S Number that identifies your business to banks and other financial lenders. This will allow you to open a business bank account and track all of the transactions that your business makes, which will help your company build credibility.
You can obtain an EIN by applying through the IRS website, however if your business is regularly involved with government contracts or you want better reporting of your business credit, you should consider signing up for a D-U-N-S number with Dun & Bradstreet as that is the industry standard tax ID requirement.
Start a business account
Once you have a tax ID for your business, open a business bank account as soon as possible. The earlier you get this set up and begin tracking expenses, the greater financial history you will have and thus, more data points for lenders to look at when deciding if you should be approved for funding. You will want to have a significant amount of cash flow funneling through this account so that lenders can see that you know how to handle substantial amounts of money and that you can responsibly handle your business finances without over drafting or coming up short.
Depending on your company revenues, you should determine a minimum balance that you want to have in your account at all times; it doesn’t look good for your business to have a $0 balance while in the process of applying for a loan – that can signal to lenders that you are bad with money.
Keep record of your transactions and cash flows
By obtaining a business tax ID and account as early as possible, you can more quickly begin a chain of business transactions and cash flows that can help you build credit for your company.
The process is similar to how you build your personal credit, but because this is a business entity with higher requested loan amounts, lenders need proof that your business is a sound investment that can make good on the return.