As you start a business, you should understand the importance of building a business credit rating. Just as your personal credit score is essential for you when trying to get a personal loan, the business credit is also a crucial element. You should aim at building an impressive credit history for you to receive financial help from institutions when you need it.
A business credit conveys the status of your business to a trustworthy borrower. You should be able to prove to a business lender that you have an impressive record when it comes to settling your payments. Strong business credit can open opportunities for your business to receive long-term credit.
You can start by establishing a business entity. Come up with a business entity and then incorporate the start-up. A sole proprietorship may be easy to manage due to less paperwork but in this case, there is no financial or legal separation between the business and the owner. When you start applying for a loan when you are running this kind of business, you have to use your social security number. This makes your business accounts to appear on your personal credit report.
For you to establish business credit, you should choose to work with structures such as a corporation or a limited liability company. A C corporation can separate you from your business so that it is easy for you to build business credit. Though S corporations pay double taxes, it can also help you establish business credit rating easily and show a clear separation between you and the business.
If you have the finances, you can also start a limited liability company. This provides financial separation between you and the business and also offers liability protection. A business lawyer can help you choose the right structure for your start-up.
You should also get a business bank account and credit cards to specifically use for the business. Your personal finances should also be separate from your business funds. A business bank account allows the business credit bureau to monitor how you use your money for the growth of the business. This information can be used when it comes to calculating your business credit score.
Get a business address as well as a phone number different from your personal number. Dedicated business contacts solidify the existence of your business. Do not assume this step because it can help you establish business credit since you get to register your company with a business directory. Directories such as YP.com demand that businesses should have an address before their owners can sign up.
Listing the information about your organisation on popular directories can make it accessible to credit reporting agencies. Ensure that the information you give is consistent and correct. Setting a phone line for the business allows you to start a relationship with a phone company. Since the phone company reports to credit agencies, it can help you build business credit. You should also aim at having a good relationship with your suppliers and vendors.