Business Credit Builder: How To Go About It
If you just started a business, you may not have plans of asking for a business credit builder program at least, not yet. But a time may come when you may need to make such a decision. Trying to understand how to access business credit and finances is a mutual quest for small business owners, old and new. Starting from the initial costs to new growth strategies, creating a good profile for your various business credit accounts can improve your present and future business, making it a success. Building business credit is a major step for every small business that is just starting up. It enables you to organize your credit history and experience the advantages of having a good business credit.
What is a Business Credit?
Business credit is the ability of any business to stand eligible for financing. Just like people do, your business has credit scores and reports. A lot of business credit bureaus like Experian, Equifax, and Dun & Bradstreet create records of credit information and late payments on businesses. This is because your business credit report may be used by creditors, lenders, insurance firms, and many organizations monitoring and assessing business contracts or credit applications.
How To Establish Your Business Credit
Establishing and building your business credit can help you improve and bring your business plans to reality. The following are various ways to do just that.
#1. Incorporate your business
You may already be incorporated while reading this, still, you need to read more of it. In business partnerships sole ownership, the business is officially the same as the owner. So, there can be no separation of credit history from personal business. Forming an LLC creates a business that is separate from the owner, by law.
#2. Maintain Good Credit Relationship With Suppliers
In the business world today, having a good round of credit with relevant suppliers at hand is very important. A good relationship helps you avoid making any upfront payment or request for services. Assuming you have a good credit line with few suppliers that report to credit agencies, you can be sure of a positive credit history for your business. Just with not less than five of them to create a credit for your firm.
#3. Obtain an Employer Identification Number (EIN)
The EIN is required on federal tax filings to open a bank account for your business in the name of the company. It is a general security number for any business, new or old. A lot of larger businesses require an EIN from their suppliers to make payments for the services provided, as this is by the IRS requirements.
#4. Pay on Time
This is always the first and compulsory rule in all credit situations. Making early bill payments proves how effective and reliable you are in managing your debt. Late payment history will reduce or pull down the ratings on your business credit. It can also affect your business credit profile negatively.
#5. Obtain Business Credit Card
You need to get at least one business card that is not personally linked to you or any other owner. Preferably, select a company business credit cards that reports directly to credit firms.
Build your business credit now, to ensure that your credit scores and history records are soaring and getting better. Also, whether you have to get a loan now, later, or never, good credit activities are a good start for a successful business.