While there are ways to access business loans for bad credit, it’s less than optimal. Instead, you can follow these recommendations to build your business credit along your journey. 

Some of these tips can be performed from the outset of starting your business. Others may happen over time. Either way, if you consistently take care of the following, your business credit will grow.

• Become known: Once you start doing business, you need to let people know about it. We aren’t just talking about marketing and making sales. It’s important that you start to use your business name and establish its reputation. For starters, list your business phone number in a directory. Open a bank account in your legal business name.  

• Separate expenses: Piggybacking on the previous point, use your business bank account and personal bank account accordingly. Separate the two and keep your business expenses and transactions solely within your business’ bank account. This one step will help overcome many hurdles, like dealing with taxes and monitoring your business expenses. It’s also a good idea to separate personal and business accounts because if anything is legally to happen to your business (like being sued), then your personal finances won’t be put at risk. 

• Build good relationships: Some vendors and suppliers report to credit bureaus, others don’t. If it’s possible to do so within your industry, try to establish some relationships with vendors who do report to the bureaus. This way, you can build your reputation as paying bills on time and boost your credit history. For the vendors who do report to the bureaus, try to set up payment terms based on extending a line of credit. This way, you pay invoices on net-30 or net-60 terms and prove your creditworthiness (trust that you will pay what you owe).

• Pay on time: Never miss a deadline to pay a vendor or bill. The detriments extend further than having to pay interest. It also will tarnish your credit score and go against the grain in your endeavor to build good business credit. What’s more is that if you are able to pay early, you can even get some extra brownie points and potentially fast track building desirable business credit.
  

• Open a business credit card: Business credit cards will report to the credit bureau, so it’s worthwhile to open one or maybe a few. Just know that if you cancel a credit card, it doesn’t work in your favor. So, start with one and pay bills on time, or even early. Be sure not to overextend business lines of credit. Only use as much as you know you can pay back. A good rule of thumb is to try and only use less than 30% of available credit.
  

• Incorporate your business: Consider establishing your business as an LLC (limited liability corporation) or incorporating your business (Inc.). Just like separating your bank accounts, this aids in removing liability on your person as to being held responsible for the business should you ever face legal ramifications.
  

• Get an EIN: An Employee Identification Number (EIN) is like a social security number for your business. It’s your federal tax ID and it’ll come in handy when opening business credit cards, business bank accounts and incorporating your entity.
  

• Monitor your credit: Credit reports can be faulty. It’s up to you to monitor your credit history that’s stored with the aforementioned credit bureaus to remedy any issues that may come up. If you do happen to come across a mistake, be sure to notify the credit bureau and have it fixed.
  

• Use credit to assess cash flow: With good credit, you may qualify for lower interest rates when agreeing to business financing. This helps manage cash flow. It’s always best to seek business funding with the lowest interest rates that you qualify for because the interest rate is the cost of borrowing the money. With a credit card, you can leverage the grace period before interest rates accrue whereas lines of credit won’t offer that same perk.