Whether you’re starting a new business, or you’ve been running one for decades, knowing how business credit works can allow you to take advantage of opportunities for growth and make it through tough times when they occur.

Having solid business credit will help you get access to capital when you need it. It’s also an indicator of how healthy and trustworthy your business is to potential partners.

What’s Business Credit?

Business credit is a metric that proves your business’s ability to handle its finances and how trustworthy it is with paying money back. It allows you to borrow money that can be used to purchase goods, services, and equipment for your business.

There are three main business credit bureaus that will calculate your business credit score. The score is determined by acquiring information from business credit cards, banks, vendors and other accounts payable data. Your payment history, debt, company size, industry risk, and how long you’ve been building business credit are all factored into your score.

When Should I Start Building Credit?

It’s easy to think that you don’t have to build credit until you need to access capital, but this is a critical mistake. If you wait until you need a strong credit score to start building business credit, it may be too late if you have a surprise need or an important opportunity pop up that requires access to loans.

Unexpected events happen all the time in business. Things slow down out of nowhere, a bad snowstorm disrupts inventory, or a big piece of equipment breaks down.

You’ll need that loan or established line of credit to get things back on track so your business doesn’t miss a beat. If you put off building business credit, then it can be difficult, or impossible, to access funds on short notice.

Can Business Credit Grow My Business?

Business credit can not only provide a safety net but offer growth opportunities as well. Because it’s crucial when establishing relationships with your vendors or suppliers, you can use your credit score as a negotiation tool to lock down better deals, avoid prepayments, and even pay on credit. The better your credit, the more faith your vendors and suppliers will have in doing business with you.

Good credit can also give you access to lines of credit and bigger loans to grow your business. This will provide you with funds for those critical moments when it’s time to expand or you need to plug a financial leak. Funds can empower you to hire new employees, stock up on inventory for the busy season, expand office or manufacturing space, purchase new equipment, and many other opportunities to grow and scale your company.

Selecting the Right Lender

You’ve built up your business credit through your suppliers and vendors, loans, and credit cards, and now you’re ready to pick the right lender for your business. But what should you look for in a lending partner?

A lender is a lot more than a transactional relationship to secure a loan. A lender is someone you should be able to talk to when times get tough, you’re not sure what the next step is, and you need assistance getting the right lending products for your current situation. Having someone who understands your business and you as a business owner is vital.

If you’re a small business owner, working with a community bank can alleviate a lot of headaches. At Crown Bank, we’re focused on growing businesses that support our community by providing resources, products, services and jobs our community needs to thrive.

Next Steps

Now that you know the importance of building solid business credit, why it benefits you, and how to find the right lender to take advantage of important opportunities, it’s time to start building your business credit.

Ready to talk about your next steps? We’ve got you covered. Connect with Crown Bank to learn more about building business credit and how it can impact your company’s growth in a positive way.