How Long Does It Take To Build Business Credit – Experts say it takes three years or more to get a loan for your business. Here’s how to get started
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How Long Does It Take To Build Business Credit
Experts say it can take three years or more to set up a business loan, but some lenders can take as little as a year. If you’re trying to get a new business loan, these steps can help you get started.
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Most business owners don’t like to hear it, but when it comes to building business credit, slow and steady wins.
Nat Wasserstein, a restructuring consultant and managing director of Lindenwood Associates in the New York area, estimates that it takes three years or more to build a business loan.
“They want to see you were there,” Wasserstein says. “When you have that, they want to see that there’s nothing out of the ordinary. There are no sentences. They should have enough time to decide whether they want to lend to this company.”
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When you’re just starting out, you can apply for a business credit card or small business loan based on your personal loan, but ultimately it’s a good idea to separate your personal loan from your business loan.
Once you get a business loan, you can apply for a business loan without personal liability; the company assumes responsibility for loan repayment.
Some of these benefits, such as lower interest rates, are obvious. This gives you more money to grow your business and outperform your competition. Other benefits are not so simple.
For example, a business owner who knows the company has good credit doesn’t have to worry as much about financing, which can reduce stress and allow them to focus on growing their business.
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Your business credit score is based on your past performance in managing your business finances, such as your business checking account, any credit accounts you open with retailers such as office supply or hardware stores, and any business credit cards you open, and any which loan you take out.
Each business owner must have a checking account with a name and a federal business identification number that is separate from their personal one. This helps establish the business as an entity separate from you.
Be sure to maintain a sufficient balance so you don’t end up with an overdraft or a bounced check. This will show lenders that you are responsible for your finances.
Many big-name providers report to Dun & Bradstreet and other credit bureaus, Wasserstein notes. It’s even possible that a provider like your phone company will report your payment patterns to the credit bureaus, so be aware, he advises. Put bill-paying reminders on your calendar so there aren’t any blips on your radar screen for the next few years.
How Long Does It Take To Build Business Credit?
Repeating good financial behavior will improve your chances of a successful credit card application. Good point to try to do it for a year. At this point, loan originators will have a decent amount of activity to rate you.
You can also check your credit report to make sure your credit standing is in good standing before you apply. Credit bureaus can sometimes take a while to report to the credit bureaus. Credit card issuers will likely also check your personal credit, so make sure it’s where you’d like to be before you apply.
If you’ve fallen behind and paid some bills late—which is common in new businesses with unstable cash flow—wait for 12 months of perfect or near-perfect experience to apply.
If you pay that bill on time every month, you’ll build a stronger credit profile. Just be careful not to use all available credit. This will lead to high loan utilization, which will hurt your business credit.
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Even if at first you can only get a credit card with a small credit limit, like $1,000, be patient. Rome wasn’t built in a day, and neither are business loans.
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Elaine Pofeldt writes the Credit for Your Business column, answering a question each week about small businesses and credit. Pofeldt is a journalist specializing in entrepreneurship and careers, writing for publications such as CNBC, Forbes, Money and many others. She is the author of The One-Man Million Dollar Business, which explores how solopreneurs can make seven-figure incomes without hiring employees. She is the former editor of Fortune Small Business magazine and the co-founder of www.200kfreelancer.com, a website for freelance professionals.
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Editorial integrity is key to every article we publish. Accuracy, independence and authority remain key principles of our editorial principles. For more information about automated site content, please email Lance Davis, Vice President of Content, at lance.davis@bankrate.com. Just as individuals need good consumer credit to get a loan, companies need to build a solid credit history to be successful. This article will look at how it takes almost two to three years to build good business credit and what you need to do to achieve it.
When you’re just starting your business, your creditworthiness will be based on your personal credit score and history.[1] Generally, it takes two to three years to build business credit before being considered for a business loan.[2] However, there are ways you can build business credit quickly (or at least faster); read on for more information.
You may be wondering why entrepreneurs don’t just use a personal loan to get a small business loan. In fact, many do: 46% of small businesses use personal credit cards [3]. But keeping your personal and business finances separate is important if you want to protect your assets and credit.[4]
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