Tips for Building Business Credit
Every business needs capital in order to function. Most new business owners use up most of their working capital getting things started and have little left over for the day to day operations. The biggest problem a new business might face is finding the funds to stay afloat until things pick up. If you are planning on trying to get a small business loan, you will need to learn how to build your business credit fast.
Choose the Proper Structure
Choosing to be an Inc. or an LLC separates your business interests from your personal interests. An LLC means that your liability is limited to the business. It also shows that your business can stand on its own without relying on your assets to support it.
Have Your EIN in Place
Obtaining an Employee Identification Number (EIN) will distinguish you as a business with the federal government. With an EIN, you can open bank accounts and perform other tasks that will allow you to manage the day-to-day operations of your business. You will use your EIN to record your assets and also file your taxes. Using your EIN will help establish which accounts belong to your business and which ones are your personal accounts.
Open a Bank Account for the Business
Once you have your EIN, you will need to open a bank account for your business. The bank account will allow you to perform transactions under your business’ name. This identifies your business as its own financial entity. The bank account for your business can be used to pay bills, cash checks, and set money aside for specific projects.
Apply for a Business Credit Card
Opening a line of credit is a positive step in showing creditworthiness. Using your credit card for small purchases and paying it off each month will show a positive payment history. Choose a credit card that reports to all three credit bureaus and you will have a modest credit history after a few short months.
Build Your Credit By Using Vendors who Report Positive Account with Credit Bureaus
One of the best ways to build business credit quickly is to work with vendors who report positive payment histories to all three credit bureaus. The faster you pay off your invoices, the more positive reports you will have going to the credit bureaus. This may not seem important at first, but as a new business, any positive report will boost your credit and increase your creditworthiness.
Keep a Close Eye on the Credit Reports for Your Business
Once you begin to establish a credit rating, you will want to keep a close eye on your credit reports. Look for any discrepancies that may adversely affect your positive rating. Try to pay off your balances quicker and borrow less.
When you are ready to start expanding your business, make sure you have your business credit on point. Apply with a lender that can provide you with the funds you need in just a few hours instead of banks that could wind up taking months. Understanding your business credit and how you can improve it will help. When you’re ready to do this, contact EJN Financial to begin.