Building Business Credit: Why It’s Vital for Growth

or a small business owner, building business credit is a major milestone toward financial stability, business growth, and more funding opportunities. While it's common to rely on personal credit to cover early expenses, that habit can greatly cap your business potential and increase personal financial risk. 

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Strong business credit allows you to unlock valuable financing opportunities, larger lines of credit, and long-term growth without jeopardizing your finances.  This guide will cover why building business credit is important, how to speed up the process, and why the Novo Business Credit Card can be a perfect tool to help you achieve your goals.

Why Building Business Credit is Crucial for Small Businesses

Business credit reflects the financial history of your business in terms of handling credit and paying bills on time. It's separate from personal credit and serves as the standard used by lenders, suppliers, and other businesses to analyze your company's health. That’s why building business credit is highly important for several reasons:

• Better financing terms mean that, in turn, there are viable means to get loans with better interest rates and terms. This makes it easier to invest in growth without overpaying in interest. 
• Larger credit lines are more accessible to businesses with strong credit, offering them the financial flexibility needed to manage bigger projects, or cover substantial operational costs.
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Despite being crucial, business credit is one of the most undervalued tools entrepreneurs use. When your company is at its growth stage, a good credit profile will be your ticket to better financing options, attractive terms from your suppliers, and increased cash flow.

Relying on Personal Credit for Your Business

Many small business owners use personal credit cards or business debit cards to manage expenses. While that may work temporarily, it comes with several risks:

For example, most personal credit cards have significantly lower limits than business cards, which might restrain your ability to finance larger business investments.

Using personal credit also does nothing to build your business credit history. In that process, you also lose the opportunity to establish a credit profile in your business's name and thus limit future financing opportunities.
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How Building Business Credit Can Boost Your Business

Strong business credit doesn't just help secure loans; it is crucial to day-to-day operations, negotiating with suppliers, and keeping the cash flow. Here's how building a good business credit score can give your company a competitive edge:

1. Access to Better Loan Terms

With good business credit, you may qualify for loans with lower interest rates and more favorable repayment terms. Lenders will look at your business as less of a risk, which could equate to better financing options for your operation. 

The better your terms, the more money you'll be able to borrow with less cost, which fuels expansion, new projects, or inventory purchases.
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2. Larger Credit Lines

The better your business credit is, the larger the lines of credit you can tap into during seasonal fluctuations or unexpected expenses, which could be used to make bulk inventory purchases. This access to more credit can be all the difference between taking advantage of a new business opportunity or having to pass due to a lack of funds.
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3. Building Credibility with Suppliers

If your company has good credit, you will find more options for suppliers offering you better terms. They can offer extended payment terms or even give a discount for ordering more in bulk; this, in turn, puts more liquidity into your business. 

A supplier will be more likely to trust that they get paid on time when they see an established credit history. The better the deal, the better it will be for your business.
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How to Build Business Credit Fast

Some of the surest strategies that have proven effective in building business credit fast are usually tied to responsible banking. For example, paying on time is the cornerstone of a good credit score. Delinquent payment draws down your business credit, so never forget to pay all bills, including credit card payments, before the due date.

It is also wise to use only a portion of your available credit. You want it below 30% of your total credit limit, ideally. This proves to lenders that you responsibly manage your credit and are careful not to overextend your business finances.

As your business credit grows, keep your finger on your credit pulse. Run a business credit report frequently to identify any mistakes that could be lowering your score. You can monitor your business credit through various platforms online.

Another great way to build business credit fast is by opening up the trade credit with vendors. Most of them report your payment history to the bureaus, meaning you can boost your credit profile even more by paying on time.
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The Long-Term Impact of Strong Business Credit

Building business credit is about more than just getting immediate financing. It's about enhancing your business's reputation, protecting your finances, and driving sustainable growth. Over time, strong business credit will enable you to enjoy many more perks.

When it's time to grow—whether purchasing new equipment, opening a second location, or hiring more employees—strong business credit means you can get the financing you need for expansion. That also includes the lack of high interest rates or restrictive terms.

Strong business credit also lets you strengthen your relationships with suppliers and lenders. A positive credit history reflects your business's reliability and financial stability, building trust with suppliers and financial institutions alike.

The capability of securing loans, lines of credit, and trade terms when required provides the agility to adapt to new opportunities or unexpected obstacles without interrupting cash flow. By building fast business credit and maintaining a strong credit profile, you set your business up for long-term success.

Novo's Business Credit Card: A Powerful Tool to Build Business Credit

Novo's new business credit card is designed to help small business owners build business credit fast. Here are some of the business perks that come with it:

1. Cashback and Rewards

Novo’s business credit card goes the extra mile to offer cashback rewards for business purchases that will be reinvested in your company. Regardless of office supplies, marketing expenses, or travel— every dollar spent will build up business credit and earn rewards.
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2. Personal Discounts

Small business owners will also benefit from discounts tailored to essential services and tools, including accounting software, cloud services, and more. Such savings can help you run your business well within a specific budget.
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3. Credit Building

While Novo's business credit card will not report to the major business credit bureaus immediately, your financial history will affect future financing from any bank. This could improve your chances of qualifying for better loan terms and additional credit.
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Wrapping Up

Building business credit is about more than just securing loans; it's a financial bedrock supporting growth, building credibility, and protecting your assets. By implementing these strategies and ensuring that the right financial tools do the talking on your behalf, you can build business credit quickly, safely, and efficiently. 

With Novo's new business credit card, small business owners can build up business credit fast, earn valuable rewards, and strengthen financial relationships. So, explore Novo today and see if it’s the right solution for your business.

Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.

Novo is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC. Novo Business Credit Card™ is issued by Continental Bank.

Novo is the marketing name for Novo Platform Inc. and its subsidiaries and affiliates. 

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