Building Your Business’s Credit
Much like you maintain and build upon your own personal credit report, your business has its own functioning credit as well. Good credit is needed to apply for loans, open new lines of credit, and increase the capability for hiring more employees. If you are looking to expand your business, it can be difficult to do so with bad credit, or with no credit history. A new business may not have enough credit history to become qualified for certain loans. In that case, how can you begin to build credit history for your business? How is this different from building personal credit history? There are a lot of things that your business lender can teach you about establishing the right kind of credit for your business.
Opening Accounts
The fastest way to spur growth and start establishing credit history as soon as possible is to start opening accounts with your suppliers and customers quickly.
Start keeping track of your payment history, and report it to credit bureaus as soon as possible. Use a DUNS number so that your lender can start taking hold of your account information.
The Beginning Steps
If your business has just been established, there are a couple of things you can do to start organizing your credit the right way. First, you’ll want to obtain an Employer Identification Number from the IRS. This is the easiest way to start tracking your credit history and report your credit history as legitimate. You can open a bank account under the name of your business, rather than in your own personal name. Lastly, make sure your business has its own phone number and address so that people can contact your company directly.
Apply for Small Loans
You can start getting some loans right away, even without too much credit history. Seek out a lender at one of your local banks who can take a look at your business’s credit report. Sometimes, you may need to use your own personal credit report to apply for the loan. This is okay, as it can still help to build up credit for your business. If the loan can be established in the name of your business, however, it can start developing reputable credit history right away.
Use Your Credit as Much as Possible
Use your credit in order to build it up. The simple act of qualifying and obtaining a business credit card is not nearly enough to actually build up a decent credit history. You need to use the card and use your loans to start racking up scores. However, make sure you are still spending within a reasonable limit. You should spend as much as you are able to pay off at once, so that you don’t prevent over-drafting. Don’t max out your credit cards; instead, spend a decent amount and then pay off the remaining balance. This can also help to establish a good credit spending habit that the banks will surely notice.
These are several of the things you can do to start establishing credit for your business. By obtaining all the necessary license numbers, and by beginning to report your credit to the bureaus, you are well on your way to building your business’s credit. Opening supplier accounts and using approved cards is a great measure for your credit report as well.
Featured Image: twitter
Read More >>