In order to develop business credit, your company will be reviewed from several angles, all play a very important role in establishing corporate credit. Now that we have discussed the business credit reporting agencies, what you must do in order to get your corporate credit profile established and how you will be scored, lets discuss your company. Specifically, those are your business’
- Bank Account
- Banking Ratings
Your Business Bank Account and Corporate Credit Development
Along with when you organized your business, the age of your bank account is a very important.Creditors are going to assume that you began conducting business when you opened up a business checking account. As far as corporate credit goes, that is the birthday of your business. The longer the relationship is with your business financial institution, the better it is for the purposes of building corporate credit. If you have a long term relationship with your business bank, do not change banks.
In the first portion of the business credit preparation process, you should have already made certain that your bank account documents match those with the IRS, your state of incorporation and any other government agencies – it is critical that your entity name matches identically on each record.
Leveraging Business Assets for Financing
If your business owns assets, you have easier access to capital and credit. Some assets can be leveraged or even sold outright for working capital. By having assets owned by your business, you have more opportunities for financing, as well as open doors for more favorable terms and how many lenders you can work with. You can view more asset-based financing options with business assets.
Business Revenue and Income Related Credit Evaluation
Of course, your business needs to have proven revenue and show the ability to manage debt. Timely payments of business financing are supported by consistent business revenue. Lenders will have to see that your business has enough revenue to pay your business debts and terms.
Your Bank Rating and How That Affects Business Credit
When building business credit, you want to have an average minimum balance of at least $10,000 for the last 3 months in your primary business checking account. Lenders will review your bank ratings and correlate that with the forecasted ability to manage debt. The scale is very simple you have a “Low, Medium, High” rating for the number of digits in your average bank account. So if you have $1,000, you’re rating is “low 4”, being on the low end of the 4 digit figure. If you had $9,000, you would have a “high 4” rating. In order to qualify for most business financing, you want to have at least a “low 5” rating. This means that you have an average minimum balance over the last 90 days of $10,000. This is important to build business credit and the money doesn’t have to get spent, it just has to be there for 3 months to have a “low 5” rating from your bank.
Insurance and Satisfying Lender Requirements
Most banks will need to see several types of insurance. Even with all of the requirements above, there is still a big factor that is necessary for a business loan. If your business has revenue, assets and a solid bank rating, that is a healthy start to proving that you can manage expected expenses. There are unexpected expenses that banks and lenders know are more important than business debt. Your personal health for example, this will have to be insured before being granted business loans from a bank. Your automobile insurance is going to be reviewed as well, along with business liability insurance, because they all play an integral part in the business credit picture. Your lenders will want to see all of your insurance and make sure that unexpected events are covered prior to being granted credit for your business.