Strategies & Best Practices to Improve Your Startup’s Creditworthiness

Starting a business is a big decision. But running a company always proves to be a little more complicated than most entrepreneurs contemplate. According to statistics, 20 percent of startups don’t make it past the first year.

Unfortunately, the troubles for startups don’t end after a business makes it past the first year. After ten years, only less than 40 percent of startups remain standing.

There are several that cause startups to fail, with poor cash flow being one of the most critical. A business’ credit rating can make a big difference in access to financing, which can mean the difference between survival and closure.

What Is Business Creditworthiness?

As the name suggests, a business’ creditworthiness measures how good a business is in its ability to repay debts. Businesses’ creditworthiness is determined by several factors, such as history with lenders and suppliers, type and size of business, debt repayment performance based on the performance of similar businesses, and legal fillings such as bankruptcies, tax liens, and judgment.

Good creditworthiness can help your business in several ways. First, it ensures you will have a better chance of securing financing with lenders. Also, lenders look at a business’ creditworthiness when determining interest rates for loans extended to a business. Therefore, improving your credit score should be one of your top priorities as a new business.

4 Best Practices to Improve Creditworthiness

1. Pay on Time

Whether you are servicing loans or paying suppliers, you must always ensure that you make your payment before the due date. Making payments for loans or invoices after the due date will mean having a bad record on your credit profile.

Once a poor record gets on your profile, it can take up to six years to get it off. This means your late payment will reflect every time a lender looks at your profile which can be a huge spoiler for what may have been a good deal.

2. Using Credit Cards to Fund a Startup Is Never a Long-Term Solution

When you hit a dead end in financing your business, it is okay to use your credit cards. However, using a credit card should be a last resort because, in comparison to other types of loans, the interest rates and fees associated with credit card debt can be rather high.

Also, having a credit card for your business can be very tempting. So if you know you are not good with money management or have a bad spending habit, a business credit card may not be the best option.

But if you still need to use a credit card to fund your startup, you must register your business first. After that, you will then need to apply and get approved for a credit card before you can start using it. Therefore, be sure to choose a reputable financial provider such as SoFi when applying for a business credit card.

3. Registering Your Businesses Patents, Trademarks, and Copyright

Registration laws for businesses vary based on the type of business. However, if your business is based around your invention, you may need to do more than meet the statutory registration to ensure that your innovations are secured.

The best way of protecting your innovations includes registering patents, copyrights and trademarking your business’ trademarks. However, the costs of registering a trademark to secure your innovations may be relatively high, so you will need to let a reputable intellectual property law firm handle the registration if you want to save a significant amount.

4. Be Careful With Getting Credit

One way of building your business credit rating is using debts to finance your business and paying it on time. This trick has been used by entrepreneurs seeking to build credit worthiness fast for a long time. However, you must ensure that you use credit only when necessary.

Getting credit for reasons that are not important could result in having a debt that may present challenges to repaying, resulting in a bad record. Applying for credit frequently can result in your request for credit being denied, which could add a blemish to your credit profile. Also, having too many loan applications over a short period can be viewed as a sign of struggling financially.

Related: Best Credit Repair Software


Now that you know what it takes to improve your business’ creditworthiness, there’s no reason why you should not make every effort to ensure your business survives where others fail. With a good credit rating, you will have a better chance of securing loans to fund business expansion.

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