How Can You Start Building Business Credit?

If you are a business owner and haven’t started a credit history for your business, this post is for you. Even if you have been around for a while, you might want to continue reading up on the latest factors that pertain to your business’ credit history. Building business credit is a key part to any business being able to receive a bank loan and many other sources of financing. But many business owners do not know where to even get started when it comes to building business credit and we are here to help!

Whenever you are looking for financing, many funding providers are going to look at your personal credit history; as well as, your businesses’ credit score. If you do not have a business credit history, it may be a red flag for a traditional financial institution and they may begin to question if they should lend to you. Remember, lending is not just about having the money to pay the loan back. Lenders are looking for your likelihood to pay them back; otherwise known as your credibility. But before you can receive a bank loan, banks are going to look at your businesses’ credit history. So where do you even start when it comes to building business credit?

To get started building business credit you should follow these steps:

Incorporate your business

Make sure your business has a federal tax identification number (EIN)

This will allow you to start doing a number of things and writing them off to the business. These things include: establishing a business phone number whether it be a landline or cell phone. With your tax ID, come tax time, you will be able to get a good percentage of the money you personally spent back out of your taxes. But make sure you itemize your tax right offs for the IRS.

Open a business bank account

When your business is small, many financial institutions will allow you to have your business account linked to your personal account which means there is less for you to manage. But it is important to make sure these accounts are separate numbers and you aren’t just using your personal account as the businesses’ bank account.
Having a business bank account will allow you to open up a business credit card with the bank. This can be a great step to start developing credit. As you grow your business, you will be able to open up additional cards that offer better rewards programs for things like hotels and travel miles.

Develop a line of credit with vendors and suppliers

As you become more creditworthy this line can grow larger. But make sure that you are smart with your credit line and can pay it back.

The last step and probably the most important is to make sure you pay your bills back on time! Credit is about being responsible with the financing you have available. You will be dinged on your credit score every time you overdraw your lines of credit, make a late payment, or don’t pay your bills in full.

As you start building business credit, it is important to remember that you don’t have to stop growing your business. Banks are not the only funding source available. There are many options out there for funding that does not take into account your credit score. One of these options is a merchant cash advance and can be a great option to really grow your business fast. With this option, you can get access to funding quickly to grow your business while you are focused on building business credit.