As you work to understand your startup costs and expenses, you’ll also want to make sure your credit is in good stead. Poor credit history is one of the main reasons why loan applications for small businesses are often declined. Poor credit history can also impact insurance rates and the attractiveness of your business to potential partners, suppliers, and vendors.
That’s why cultivating and maintaining good credit scores — for both your personal and business lines of credit — is so important.
Existing businesses have the advantage of an established financial history. But loan eligibility for a new business is typically based on its owner’s personal credit score.
While not every small business owner has good credit, some may in the first stages of establishing credit. The Consumer Financial Protection Bureau (CFPB) offers tips to help people with limited credit histories get started.
CFPB’s Credit Reports and Scores webpage is a good place for most people looking to burnish their credit history and improve their scores. If your credit history needs help, the Federal Trade Commission has recommendations for improving your credit.
Establishing and managing business credit can help your company secure financing when you need it and with better terms. It can also help you negotiate supply agreements and protect against business identity theft.
One of the first steps you’ll want to take is to register for a Dun & Bradstreet number, or DUNS number. A DUNS number is a unique nine-digit identification number for each physical location of your business. Dun & Bradstreet also offers guidance on how to build business credit.
Before you shop for a loan or line of credit, learn how the law protects against discrimination.
It’s important to monitor both your personal and business credit reports, especially if you believe you have been the subject of identity theft.