Establishing business credit is crucial for real estate investors to gain access to financing and optimize growth. With strong business credit, real estate investors can qualify for business loans and credit cards to purchase investment properties, fund renovations, bridge capital gaps, etc. However, many real estate investors struggle to build business credit from scratch. In this article, we will explore 5 effective strategies to establish robust business credit profiles for your real estate investment business.
Get a business credit card
One of the quickest ways to start building business credit is to apply for a business credit card. Business credit cards don’t rely solely on your personal credit scores – they also factor in the length of time your business has been operating. Aim to get approved for an unsecured business credit card with moderate credit limits from major issuers like Capital One, Bank of America, Chase, etc. Use the credit card strictly for business expenses and make sure to pay your balance in full each month.
Open business credit accounts
Apply to open credit accounts with vendors, suppliers, service providers relevant to your real estate business. Home improvement retailers like Home Depot and Lowes offer business credit accounts with generous credit limits. Open accounts with business service providers you use regularly like office supplies companies, internet/phone providers, etc. Making on-time payments will get reported to business credit bureaus and strengthen your business credit file.
Get listed in business credit bureaus
Having your business listed and monitored by major business credit bureaus like Dun & Bradstreet, Experian Business, and Equifax Small Business is critical. Register your business as a legal entity, obtain an EIN from the IRS, and claim full business credit profiles at each bureau. This establishes the foundation for tracking your business credit payment history over time.
Use business credit cards and loans
Once you have established initial business credit, utilize your newly approved credit cards and loans extensively to demonstrate responsible usage. Keep credit utilization low and make timely payments. The more your business uses and repays credit over time, the higher your business credit scores will climb.
Improve credit diversity
Strive to open a mix of credit cards, loans, and vendor accounts under your business name from a variety of credit issuers. Credit diversity is just as important for business credit as personal credit. Applying this strategy consistently over 1-2 years can help build robust, investment-grade business credit scores above 80.
By getting started with business credit cards and vendor accounts, registering with business credit bureaus, actively using and repaying credit, and improving credit diversity, real estate investors can build the strong business credit essential for accessing the optimal financing to scale your portfolio.