How to have good business credit
Very few businesses (if any), can survive in this economy without business credit. Many business financial experts recommend that even a new business try to set up and establish good credit right from the start of the business. Most businesses find that they need credit in order to purchase supplies, run their business, and even manage their business finances. However, it cannot be stressed enough that managing the credit your business has is crucial to its survival. If you fail to mange the credit of your business you will be facing serious problems that could bring about the demise of your business. This makes having good business credit crucial. Here is what you need to know about how to have good business credit-
- Form a corporation-One of the first things that a business owner should do is form an LLC or a corporation as the legal entity of their business. When you do this it will automatically separate the personal credit of the business owner from the credit of the business. This will be the first step in being able to get a business credit card for the business. In addition, the business owners who do this will find that it is much easier and more effective when the business has its own separate entity in terms of applying for a business loan. After this is done the business owner will then be able to get an EIN from the IRS.
- Register the business-The next step is very important but is often overlooked. The business owner should register their business with all business credit bureaus. This begins the process of the business being able to create its own credit history which is crucial for when the business owner is seeking additional financing. This will begin the process of documenting the credit history for the business so it should be done immediately.
- Read the fine print-Business credit can work slightly different then personal credit. This makes it crucial that you read all of the fine print that comes with your business credit. You will need to make sure that your business is complying with all of the requirements that come with business credit. If you fail to do this potential lenders and others in the financial world will see the problems that you are having managing your business credit and will be reluctant to consider you a good risk for any additional working capital.
- Obtain the credit-Once you have properly prepared you are now ready to get the business credit that you need. Keep in mind that you may need a business plan as well as any financial statements that the lender may require. If you are trying to establish business credit for the first time you may find that this can be an overwhelming task that takes patience and perseverance. However, with continued persistence you will find a lender who is willing to extend you the business credit that you are looking for.
- Be prompt with all payments-Just like with personal credit a large part of the business credit rating will be based on how timely the payments are made for any business credit. This makes it crucial that if you have any type of business credit that you make sure that the payments are sent in on time, every time. This will help to insure like no other step that your business has a good credit rating. If you continue to make late payments or worse yet, fail to make the required payments not only will your business credit rating suffer but your ability to obtain needed business financing will be greatly reduced.