If you have opened a startup or are a small business owner, you are probably perplexed about the various factors that may potentially affect your business. Business credit is one of them. For startups and small businesses, it is imperative to rely on business credit to take financial aids for raw materials, machinery, rent, payroll, etc. However, loans and interest rates are largely dependent on how reliable, credible and responsible the business is. This evaluation is made by taking a good look at the company’s business credit profile. Moreover, business credit also affects business deals and investments.
A strong business credit score and rating will fetch a business endless benefits such as a higher credit limit, lower insurance premiums, favorable terms and conditions for lending, etc. Establishing impressive business credit is not necessarily cumbersome. A little bit of planning and forethinking is all you have to do!
Still confused about how to get started? Here are some ways in which you can establish business credit, get business credit and build a business credit.
- Repay your debts on time - Investors and lenders only show interest in businesses that can repay loans and make payments by the stipulated time. This must be one of the primary objectives if you want to make your business credible and trustworthy. A stained account of failed and delayed transactions will only bring down your business credit score.
- Open a business bank account - Opening an official bank account that is only meant for your business is a very good step to take while establishing and building good business credit. This is a great way to put your brand on the map and make the business legitimate. Apart from making payments using your business bank account, opening a business credit card also aids in establishing business credit. Additionally, you can also list your business contact number in directory assistance.
- Acquire an Employer Identification Number (EIN) - From complying with the IRS requirements to opening a business bank account for your Limited Liability Company (LLB) or business corporation, Employer Identification Number (EIN) is a must! As the name suggests, EIN helps identify your business for federal tax filings and also secures contracts and deals.
- Keep a track of your credits - After establishing business credit, monitoring it on a regular basis is equally as important. New trends, information, and statistics are always ready to surprise you. It is fairly common for business owners to find errors and inaccuracies in credit reports. Hence, keeping a track of the credits is a good way to eliminate such discrepancies. Being well-informed and alert about your business credit is really helpful in maintaining and improving it.
- Keep a clear distinction between your business and personal entities - Making your business a separate entity from your personal profile, not only increases its integrity but also makes expense management a lot easier. Credit cards, phone numbers, and bank accounts tied legally to the name of your business are a great help when it comes to attracting business deals and managing taxes. Any mishap in your personal credit history must not reflect on your business credit. Forming a Limited Liability Company (LLC) or incorporating the business is the first step to prevent such setbacks. A sole proprietorship is a risk absolutely not worth taking! If you have completed the above steps, you are almost all set to build and get your business credit. Accounts reporting to several business credit agencies such as Experian and SBFE will help you set up a dynamic and robust business credit report. In this way, you can increase your chances of obtaining loans at favorable rates of interest and increase credit lines. Consequently, your business credit will now be accessible to dealers, vendors, investors, and companies, helping you bag great deals and contracts for your business.