HOW TO BUILD BUSINESS CREDIT

Building business credit is just as difficult and confusing as building personal credit. Establishing a business credit line is important to give your business the flexibility it needs. You should also keep in mind that a business credit line is different than a personal credit line. It will usually allow you to have access to more funds than a personal credit line and give you better rewards as well. You may not know how to build credit for your business at first, however if you use these simple steps you’ll be off to a great start.

A Credit Card for Your Business

The first thing that you’ll want to do to help you with establishing business credit is to get a credit card. As with building personal credit, a credit card will be the easiest way to start building credit. When you’re filling out a credit card for your business you’ll want to make sure that you’re not putting down personal information such as your social security number. A lot of credit cards are described as business credit cards but are actually tied to your personal finances. Most of the time your corporate credit card application will require you to show proof of ownership for your business.

Your card will most likely have a credit line in the neighborhood of $1,000. While this may not seem like a lot for a business it’s enough to help your business get its credit started. It’s essential that you keep up with your payments so that you don’t hurt your business’ credit.

Extending Your Credit Line

After you’ve made several on time payments with your current credit card you’ll be able to continue establishing business credit by getting other cards or lines of credit. While it’s valuable to extend your corporate credit line you’ll want to make sure that you don’t overdo it. If you happen to get too many lines of credit open at once you may not be able to get any further due too many open accounts. To avoid this you should pick and choose the lines of credit that you open very carefully by analyzing which ones will be the most beneficial now and in the long run.

Loans from the Bank

Finally you can consider getting loans from the bank. After establishing business credit you can have access to larger credit lines in the form of loans. Most of the time a bank will want to see what you’re going to use the money for and how the loan will help your business advance. In some cases the bank may require you to use your personal assets or personal credit for collateral. While you can do this it’s a highly ill-advised idea. If for some reason your business is unable to pay the bill, then you may lose all of your personal assets as well. It’s best to avoid this and not even consider it. When you’re building business credit you should keep in mind what you may want to obtain later on in terms of credit. By building business credit in the right manner you will be able to avoid using personal assets for collateral.

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