Business Credit 101 

 

Mause Ramirez started MCS Cleaning Services, which offers both residential and commercial cleaning, as well as window cleaning and pressure washing, in 1995 in the San Francisco Bay Area. Known as Señor Ramirez to his customers and community, he loves seeing the smiles on his client’s faces when they see the results of his team’s efforts. 

 

Like many business owners, he relied on personal credit when starting his business. “Focus on doing everything right for your business,” he says, “and before long, you’ll build up enough credit to invest in better equipment and advertising.”

 

Whether your window cleaning business is brand new or well-established, like MCS Cleaning Services, building credit while you’re building your business can pay off in the long run. 

Why business credit matters 

What happens when you get an inquiry for a large commercial job? As you estimate the job, you probably vet the client to help ensure you aren’t going to have problems collecting payments once the work is completed. 

 

Your suppliers and prospective lenders do the same thing. They want to size up your business and make sure it’s not too risky to do business with you. Business credit reports and business credit scores make it easy for them to check out your payment history and track record with other companies. 

 

Whether you’re looking to stock up on supplies during the off-season or invest in a new pressure cleaner, good business credit can make the difference in getting the best terms. 

Getting Started: First Steps

Building business credit isn’t complicated, but it requires attention to detail – something you already know about from your jobs. Here’s how to begin:

 

Establish your business foundation

First, ensure your business is properly registered with your state and that you’ve obtained any necessary business licenses. It’s best to operate as an LLC or corporation for any number of reasons, but you can build business credit as a sole proprietorship if that’s not an option. Business credit bureaus will often pick up on state filing information to create your credit file. 

 

While you’re at it, get an Employer Identification Number (EIN) from the IRS if you haven’t done so already. Not all businesses need one, but you’ll often be asked for this number on credit applications or other forms and it makes it easier to separate your business and personal finances. 

 

A business address and phone number will be requested on applications, so figure those out as well. (If you want to use your cell phone for your business, consider a separate number like Google Voice.)  

 

These basic steps help credit bureaus verify your business’s existence and start building your profile.

Start your credit file

Once you have set the foundation, your next step is to get accounts that will report your payment history to business credit reports. 

 

An easy way to get started is with suppliers who report to business credit bureaus. Cleaning supply vendors offer payment terms to businesses with established credit. Net-30 terms, for example, give your business thirty days to pay. This can help you: 

 

• Better manage cash flow between jobs
• Stock up on supplies during slow seasons
• Take advantage of bulk pricing
• Build credit while making purchases you need anyway

 

With strong business credit, suppliers may be willing to extend even longer payment terms. 

Consider business credit cards

Most small business credit cards report to business credit. Pay on time to help establish good business credit scores. Some cards offer rewards like fuel discounts or cash back that you can use to save even more money. 

Monitor your progress

Keeping tabs on your reports helps you spot and fix issues before they cost you opportunities. You have no control over who reviews your business credit (there’s no restrictions on who can purchase those reports), so make sure you’re checking before potential lenders or even clients do. 

 

Practical Benefits for Your Window Cleaning Business

We already mentioned how a strong business credit history may help you get better terms on trade credit. Other potential benefits include:

 

Equipment leasing

Need new lifts, power washers, or water filtration systems? Better business credit may help you get lower security deposits on leased equipment, more flexible payment terms or higher approval amounts for equipment financing. 

Insurance and bonding savings

Insurance companies often check credit reports when setting premiums for commercial insurance. Better scores can lead to lower rates on general liability insurance, commercial vehicle insurance, or professional liability coverage. Your business credit may also play a factor in getting a surety bond. 

Bigger clients

Larger businesses often check business credit for contractors. Build good business credit to help demonstrate your capacity for those larger jobs. 

Common Mistakes to Avoid

As you’re building business credit, avoid these mistakes. 

 

1. Don’t mix personal and business expenses. Keep your business transactions separate. This helps build a clear credit history for your business.

 

1. Don’t ignore small bills. In business credit, even a payment that’s a few days late can impact your score. Set up automatic payments when possible.

 

1. Don’t forget to check your reports with multiple bureaus. Different customers and vendors may check your report with different commercial credit bureaus. To review multiple reports at one time, visit Nav.com. The Nav platform allows business owners to check, manage, and monitor their business credit with the major business credit bureaus, and build financially healthy companies in one dedicated space.

 

About the Author

Gerri Detweiler has several decades of experience guiding individuals through the confusing world of credit and has earned a reputation as a reliable and independent source on personal and small business credit. Today, Gerri serves as an Education Consultant for Nav, a financial health platform for small businesses owners to build and manage their business and personal credit, track cash flow patterns, and understand their financing options before they apply. https://www.nav.com/