Do Business Bank Accounts Help You Build A Strong Credit Record?

Having a good credit score is really important for individuals because it affects your ability to do things like take out personal loans, mortgages, credit cards and more. 

And, the same goes for businesses. Companies that have good credit scores have the ability to do a lot more and gain access to extended services, including things like business loans, apply for funding and get lines of business credit.

Now, in order to have good credit, you’ve got to build it up, and the only way to do that is to actively participate with finances in the capacity of the business.

To function as your business in a financial sense (as opposed to in your personal capacity), you need to have a business bank account. From there, anything that you do in the capacity of your business will contribute to your credit record, both good and bad. 

So, having a business bank account is imperative to being able to establish a strong credit record, but you need to ensure that you’re handling your finances properly because if you don’t, you could end up achieving the opposite result.

Why Is It Important to Have a Strong Credit Record? 

Having a good credit record definitely reflects well on your company, but there are actually lots of specific ways in which it can help your business.

• Lower Interest Rates on Loans: The higher your credit score, the lower interest rates you’ll be charged on business loans. 

• Better Payment Terms with Suppliers: If you have a solid credit score, you’re likely to be offered better payment terms because you’ll appear more trustworthy and reliable. 

• Increased and Improved Access to Credit: With strong credit, you should have more access to lines of credit as opposed to if your credit score is weak. 

• Better Professional Reputation: Your business is likely to have a better professional reputation if you have a strong credit score. 

• More Attractive to Investors: Investors are more likely to want to invest in your company if you seem like you’re responsible with finances. 

• More Leverage for Potential Expansion: A strong credit score can be helpful in terms of having more potential and opportunity for expansion. 

• Higher Credit Limit: A better credit score means your bank will probably be willing to give you access to more credit.

• Easier Access to Emergency Funding: Having a good credit score reflects well on your company, so if you happen to suddenly need emergency funding, you’re more likely to be able to get it on short notice.

• Lower Insurance Premiums: Businesses with solid credit scores tend to be offered lower insurance premiums because they’re considered less risky.

• Better Flexibility in Financial Management: If you have a good credit score, you’ll have more options with your financial management, but if you have a poor credit score, you’ll be very limited. 

Ultimately, working towards having a strong credit score will mean that your company can enjoy a bit more stability and peace of mind. You’ll have more options in terms of loans, credit and more, which tends to make things easier.

How Can Business Bank Accounts Help You Build a Strong Credit Record? 

The basic principle of building credit requires you to be financially active, whether that’s in terms of taking out credit, a loan or whatever else may be the case. 

You earn good credit by sticking to the terms of your loan agreement, for instance – paying back the money as per the terms set out in the agreement without any defaults. 

Conversely, you’ll negatively impact your credit score if you take out a loan and default on repayments. 

So, while the idea is that you’re supposed to use these services as you need them – take out loans, use business credit and so on – and build up your credit score naturally, you could also do these things to intentionally influence your credit score.

The best and easiest way to do this is to take out a line of credit that you already have the funds to repay, kind of in the same way individuals do with personal credit cards. 

You take out the credit and repay it almost immediately so that the records show you stuck to the terms and are reliable. 

Here are some more ways that having a business bank account can help your company build a strong credit record:

• Splitting personal and business accounts can help you build credit on both fronts. 
• Helps create a proper financial track record of your business transactions. 
• Allow potential lenders and investors to see your cash flow.
• Facilitates loan applications.
• Demonstrates financial stability.
• Build a relationship with your bank or financial provider.

Ultimately, if you want to have a strong credit record and build up your professional credit for future endeavours, the best way to do that is always by means of a business bank account.