Building Corporate Credit History

When you have a limited track record of borrowing, building a corporate credit history offers similar challenges to building a personal credit history. The question is how you can borrow without a credit history. The following article outlines steps you can take build a corporate credit history.

Before You Try to Borrow 

You’ll improve your chances of borrowing at competitive rates by getting your business ready before you borrow. When considering whether to loan to your business, lenders will not only look at history but at the “five C’s” of your firm.

  • Capital. Are you personally invested in your company?
  • Collateral. Do you have the assets to secure the loan?
  • Capacity. Does your business generate significant enough cash flow to repay the loan?
  • Conditions. Where are the loan proceeds going? Are they building your business prudently?
  • Character. What is your reputation in your community?

Before considering borrowing, make sure the “Five C’s” are in place for your business.

Corporate Credit Cards

Among the easiest ways of building corporate credit history is to begin with business credit cards. Make sure the card is issued in the name of your corporation and is not attached to your personal cards.

Begin using the card at least six months before applying for a traditional business loan such as a line of credit. And make absolutely sure that you pay the balance on time. This is not the time to make minimum payments only so that your balance increases.

Your Business Credit Score

Using your business credit card begins building corporate credit history. After a few months, you can apply to a corporate credit reporting agency, such as Dunn & Bradstreet and they will maintain your history and develop a credit score. 

There is a cost for this, but if borrowing is part of your business plan, you will need a corporate credit score. Remember, any negative activity such as late or missed payments goes on your history and lowers your score. Don’t begin this process unless you can meet your obligations, or you will be limited your ability to borrow by building a corporate credit history. Additionally, the amount of credit for which you are liable also affects your score. So don’t “over-build” corporate credit history with too many cards.

Non-Traditional Borrowing

Often, venders of your business can help in building your corporate credit history. For example, if you have good cash flow and other financials, a company from which you regularly buy equipment will consider financing the sale of new equipment with less to secure than a traditional lender. Such loans go into the package of all business borrowing you should be building to show traditional lenders such a banks.

Again, it’s key that your repayment history be solid.

Getting Help

Just as a co-signer can help you qualify for a personal loan, a guarantor - or even using your strong personal credit history - can help you in building corporate credit history by securing a loan when your business has a limited borrowing track record.