How Do I Get Company Business Credit?
It is quite common amongst small business owners to try figuring out how to access business financing and credit. From startup costs to new expansion strategies, establishing a strong business credit profile with diverse accounts early on can help make your immediate and future business plans a success.
What is Business Credit?
Business credit is the ability of a business to qualify for financing. Businesses have credit reports and scores just like people do. Business credit bureaus Dun & Bradstreet, Experian, and Equifax all keep a record of debt payments and other credit information on businesses. Your business credit report may be used by lenders, creditors, suppliers, insurance companies, and other organizations evaluating a credit or insurance application or business deal. Here are a few tips on how to establish business credit and then build a business credit profile that might help you bring your plans and aspirations to success.
Put Your Business on the Map.
Even though you may be incorporated when you are reading this, it deserves a mention. With sole proprietorships and general partnerships. The business is legally the same as the owner; There cannot be any separation from your business credit history and you’re personal. Incorporating a business or forming an LLC creates a business that is legally separate from the owner.
What is the EIN
Obtain a federal tax identification number (EIN). To put it simply, the EIN is a social security number for your business. It is required on federal tax filings and is also required to open a business bank account in the name of the corporation or LLC. To comply with IRS requirements, many larger businesses also require an EIN from their vendors to pay them for services provided. Obtain an Employer Identification Number.
The power of paying on time
This step here is probably one of the main rules you need to follow in any credit situation. When you pay your bills on time, it helps show your reliability and can manage your debt effectively. A late payment history, especially severely delinquent payments, will bring down your business credit rating and negatively impact your business credit profile.
Importance of a business phone number
If you have or are creating a business, you have to have a business phone number. Otherwise…how will people reach you. Do you really want people to have your personal contact information? Then establish a business phone number. Whether you use a landline, cell phone or you use VoIP, have a separate number for your business and in your business’ legal name. List that number in the directory so it can be found.
Open a Business Credit Card.
Opening a business credit card with a creditor that reports to the major credit reporting agencies is a great way to establish business credit. You should have at least one open business card, but more than one can also help. However, be sure to use caution and avoid overextending your business finances. Just because the credit is available through your business credit card does not mean you need to (or should) utilize all of it. (Find business credit cards that match your credit file using a free Nav account.)
If you have not already, seriously consider getting incorporated or becoming an LLC. By adding Inc. or LLC to your business name, you will be legally separating your business and personal credit profile and assets. If you choose not to do this and continue to operate as a sole proprietor, your business and personal credit history (among other things) will be legally attached, and your personal assets might be at risk should you ever be sued.
Separate Business and Personal Expenses.
Given the steps above, this is redundant but nonetheless important. By opening credit cards, lines of credits, and bank accounts in your business’s legal name, you will be separating your business and personal expenses. Make sure to only spend money from your business checking account rather than your personal when it comes to business expenses. Clearly separating your personal from business expenses also makes it a lot easier to manage taxes! Monitor Your Credit.
About 25% of small business owners have reported significant errors in their credit reports. Diligently monitoring your business credit history can help you spot any issues or blemishes that are not accurate. If you do find an error, be sure to file a dispute with the reporting agency
Why Should I Learn How to Establish Business Credit?
A strong business credit score can help you secure better interest rates on loans, decrease instances where you need to prepay for a specific product or service and secure better trade terms with important suppliers in your industry. In the long run, this will help you save money, keep cash flow liquid, and access the funds or assets you need to help your business grow.
Benefits of having a good business credit
Having good business credit can provide several benefits, including:
Positioning your company for more favorable payment terms with new vendors and suppliers.
Reducing the number of times, you will need to prepay for products or services purchased.
Allowing you to obtain better interest rates and credit terms from lenders and banks.
KAB Credit Services
Here at KAB Credit Services, we set high expectations for ourselves as a credit repair company. You can expect only the best service from our team of credit experts. In the economic industry, we are dedicated to helping our clients get back on financial track. We are here to assist you on the journey. We work with credit bureaus and creditors to fix and rebuild tarnished credit. Let our services and experience speak for themselves. We are highly dedicated to ensuring you attain the highest credit score possible, and will work on your individual case for inaccurate information on credit reports.