Important ways to Build Business Credit.
To build business credit is a crucial step for any latest and small business.
How Business Credit helps you?
It helps you in the following ways:
- It maintains a credit history separate from your personal credit history and undergoes the business advantages of having best business credit.
- It shows individualism between owners and the business.
Why discrete credit histories?
By having a business credit history disparate from your personal one, you can lessen the effect that negative events on one might have on the other. For example, if you have some financial missteps that influence your personal credit history and score, they shouldn’t inflict your small business credit if you have developed clear segregation and vice versa.
Why discrete business and owners?
Unless you’re operating your small business as an only proprietorship or general partnership, you need to demonstrate that the business is segregated from the owners. One of the major advantages that corporations and limited liability companies supply the owners is the protection of their personal properties. Keep this protection intact by constantly showing a visible division between the owners and the business.
Eight steps to develop your business credit.
1. Assimilate your business.
Even though you may be engulfed when you’re reading this, it deserves a mention. With the only proprietorships and general partnerships, the business is legally like the owner; therefore, there can be no segregation of business credit history from personal.
2. Receive a federal tax identification number.
This is basically a social security number for a business. It is needed on federal tax filings and is also needed to open a business bank account in the name of the corporation. In order to abide by IRS requirements, many larger businesses also require an EIN from their vendors in order to pay them for services being provided by them.
3. Unlock a business bank account.
Unlock a business checking account in the legal business name. Once open, be sure to pay the financial deals of the business from that account. If you build a business credit card for several financial transactions, be sure to pay the credit card bill from your business checking account.
4. Develop a business phone number.
Whether you utilize a landline, cell phone or you use VoIP, have a segregate number for your business and in your business’s legal name. Write that number in the directory so it can be found.
5. Unlock a business credit file.
Unlock a business credit file with all three business reporting agencies like Experian, Equifax, and TransUnion.
6. Get a business credit card.
Get at least one business credit card that is not connected to you or any other owners personally. Select a business credit card from a company that reports to the credit reporting agencies.
7. Develop a line of credit with suppliers.
Work with at least five vendors suppliers to develop credit for your company to utilize when buying with them. Request them to report your payment history to the credit reporting agencies.
8. Pay your bills timely.
Like with your personal credit, late payments will put a negative impact to build business credit.
Advantages of possessing good business credit.
Following are the advantages that a good business card can provide you:
- It positions your company for more favorable payment terms with new buyers and suppliers.
- It lessens the number of times you will need to prepay for product purchased.
- It allows you to get better interest rates and credit terms from lenders and banks.
Conclusion:
Once you have built good business credit, be sure to monitor and protect it, just like your own personal credit.