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How to Build Corporate Credit Quickly?

Banks are notoriously reluctant to lend to small enterprises. This is because a small company, especially a startup has a high chance of failing. The risk of failure increases when the entrepreneur has not taken adequate steps for building corporate credit. This is because any enterprise needs a constant infusion of funds in the initial stages to move fast enough to take advantage of emerging market opportunities.


Basic Steps

When you set about building business credit you need to take a few essential steps first. The first is to incorporate your business and limit the liability. Next you need to procure a business identification number for the business. You also need to obtain a separate business phone number and ensure that this is registered in the yellow Pages.


Establish Trust

Next you need to establish trust by building your business credit profile. For this ask vendors to extend credit for small sums and repay them on time. Obtain a business credit card and use it judiciously, seeing to it that you pay the full amount due on time each month. These actions will be reported to the credit rating agencies and be accessed by the banks.


Ask for a Bank Loan

The next business credit builder is to ask for a bank loan. Approach the bank with a great business plan and a request for a loan. Be prepared to explain and defend your plan to the banker. You will be asked a lot of questions regarding the nature of your business and the profit potential. If your business is old enough, take the old balance sheets and copies of the IT returns as well. These will help convince the banker that your business venture is indeed profitable.

Initially, your credit builder program should also be prepared to pledge the business properties and machinery to obtain low cost funds. In the event that you do not have collateral to offer, the bank will charge a higher rate of interest to compensate it for the greater risk it is incurring.


Approach Other Financial Institutions

Apart from banks, credit unions and other financial institutions too offer small business loans. Explore these avenues of funds as well. Corporate credit concepts make it clear that the cost of funds will be higher when the risk is greater. By being prepared to shell out a greater interest in the initial years, you will be building corporate credit more quickly.

Once the bank is familiar with your business account, establish credit lines for future needs as well. Ask the bank to sanction a loan for a higher amount than your current needs and use the extra funds to explore new business opportunities.


Building corporate credit is difficult only in the first few initial years. Once the trust is built up, funds flow will not be a problem at all. By following the steps outlined above, a new business should be able to shorten the time taken to get banks and other lenders trust it with their money.


If you want to learn more, consult with the experts at CL King and Associates.
CL King provides investment banking, equity research, sales and trading, and investor services to corporations and institutions. The firm also co-manages bond offerings, IPOs, follow-ons, secondaries, convertibles, and preferred.

Also read: Business Credit Mistakes - CL King and Associates

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