Building a credit history can be the most challenging but the most important thing for any business owner.
Indeed, personal credit matters but that will not finance your business adequately. Therefore, building a business identity and, with it, business credit history, is the way to go.
Learning how to build business credit will save your business from debt and create a credit history. Many institutions, like Camino Financial, offer resources to learn how to do it.
If you don’t know how to build business credit, today’s your lucky day! Keep reading to find out how!
Build Business Credit Today and You’ll Never Regret it
A proper business bank account enables a company to get business financing. It improves on a business relationship between the business and its vendors. Besides, it protects the business owner from excessive debts when trying to finance the market on their own.
It also helps you start building business credit.
Building credit history is essential primarily if you aim to expand the business to new areas. All businesses require a credit history that guarantees the provision of finances if needed. Therefore, it is vital to have a good credit history.
Imagine you run a store and a new client made you an offer. They want to buy a ton of products but they need them ASAP.
You need the stock delivered on time.
You need approximately $20,000 but have no money.
You need to apply for a loan.
After researching some financial institutions, you fill out an application with a lender that will give you the cash you need in just 2 days time. You apply for the $20,000 with a payment period of one year.
However, since your business is relatively new, there is no credit history to back the business, and therefore, the loan is rejected. You can’t help that new client that was going to bring in a lot of cash you were counting on to make that much-needed storefront makeover.
Learn how to build business credit
It is essential to build business credit as soon as you start a business.
But how can you create business credit history?
- Register your business as an LLC. This will help identify it as a separate entity (separate from you and your personal finances).
- Apply for an employer identification number (EIN). It is essential in tracking business activities and primarily for tax purposes.
- Open a business account in a bank. It is only possible to do so if the business has the EIN. Takes care of all business transactions and other activities only with this account, don’t commingle your funds.
- Get your business contact information up to date, including an address. It identifies the business as independent from you.
- Delve into establishing essential trade relationships with the business suppliers and other vendors. Suppliers are crucial in promoting your credit history. Ensure they report to the credit bureaus and organizations on your credit relationships.
- Borrow from independent business lenders who have direct access to the credit bureaus. Make on-time payments, this will go to your credit history records.
- If you get a business credit card, make sure to make payments on time, always. Also, remember not to max out the card.
- Continuously keep your credit information up to date. It will promote your credit score from different credit bureaus.
- Remember, it is very important that if you ever borrow funds for your business, you need to make payments on time and update your financial records regularly.
Building credit will bring you stability
If you follow all these steps, you will establish your business credit. That way, you’ll be able to get that business loan you need. Remember to make sure of the amount you want to borrow, the period awarded and your business’s ability to pay without crippling your operations.
Make sure you don’t become a cautionary tale, better yet, become a success story.
Start building your business credit history today.