How to Use Online Business Loans to Build Business Credit
Small businesses need a positive credit history in order to climb the ladder of success; however, many small businesses find this easier said than done. A poor credit history will prevent you from applying for traditional loans and will hurt you should you need financing for equipment or other business expenses. It’s important to build a positive business credit history before you need extra working capital. Online business loans can help small businesses build the business credit they need.
Why Do I Need Business Credit?
Business credit isn’t only important when applying for loans, but it is also proof that you’re a responsible business owner, whether you’re applying for a loan, seeking lower interest rates or want better terms from vendors. However, 45 percent of businesses have poor credit history, causing them to rely on personal credit in order to get a business loan. You always want to keep your personal finances separate from your business finances, so you need to work to establish a positive business credit history to keep your personal credit safe.
How can Online Loans Help?
Business credit scores are typically less streamlined than personal credit scores, which means making on-time payments may not be enough to build business credit. Each business credit bureau has different requirements to calculating scores and different lenders will report various types of data. The best way to build your business credit score is to apply for an alternative loan, then stick to the loan terms.
You must abide by the loan terms or the online business loans will actually end up hurting your business’s credit score more. If you’re late paying the loan, your score will suffer, making it harder to get a loan in the future.
When choosing online loans to build your business credit, choose a lender that reports to the business credit bureaus. Then, stick to the loan terms and maintain your payment schedule. There are a number of alternative lenders, not all of which will help you build your credit, so be sure to do your research prior to taking out a loan.