Are you in the process of obtaining financing for your new business or your existing business? Before you start applying for loans make sure you have what the lenders are looking for. One of the most important elements for acquiring loans from the banks or commercial lenders for your company is corporate credit score or paydex score. If your business does not have established corporate credit, you need to start right away.
Paydex is a term used in business, for a numerical score granted by D&B to Business as a credit score for the promptness of their payments to creditors. This score is used by commercial lenders in a manner similar to the way the Fico score is used for individuals. A high paydex score is considered healthy for a business. You need to establish corporate credit so you can get small loans when you need it. Having separate business credit profile helps to limit your personal liability and protect your personal assets.
Here are some tips by our experts at CL King & Associates to establish and build corporate credit:
- You need to have the right business structure. Sole proprietor will not be able to build business credit. Create a corporation or LLC.
- Get an Employer Identification Number, also known as a federal tax ID, is similar to Social security number for your business.
- Register with credit reporting agencies.
- Get trade references and retail credit
How to establish corporate credit is a step by step process. Once you have established strong corporate credit profile for your company, you increase your chances of obtaining loans. A score of 80 or higher is excellent for your business. To get the best result you need to have strong corporate and personal credit. If you personal Fico score is poor you can start repairing it while building corporate credit score. As a smart business owner you need to build separate corporate credit. Instead of applying for loans in your personal name, start applying loan under your corporate name.