In order to become a legitimate company you need to focus on your corporate credit rating. Lenders want to work with a company that has a strong credit rating and can easily repay their loans in a timely manner. To build business credit, you will need to follow a few simple procedures. This article will teach you how to build business credit so you can acquire lines of credit, credit cards, start up loans, and other funding for your business.
When you first start up your business, most of the financing will go through your personal credit rating to grant you with approval for a loan. Your personal credit rating must be upwards of 700 in order to provide you with a loan to get your business started. You need to try and separate your personal credit and business credit as soon as possible. Keeping loans under your name instead of the business name can be dangerous to you as it will be reported to your personal credit and lenders may come after your personal assets if you default on the loan. After you have been in business for a few years, you can finally pull the loans out of your name and transfer them into the name of the business so you can build business credit.
Since it will be hard to build business credit at first, you should consider opening a small line of credit or a secured credit card. This is the fastest way to build business credit as you will need to provide the lender with a deposit amount to secure the loan. As you meet the monthly deposit amounts and you maintain financial control over your loan or credit card, your credit rating will start to improve and before long you will have built up a business credit report that other lenders can use.
To acquire a line of credit or any type of business credit, you need to first start with the legal structure of the business. You must be able to acquire all of the financial records and legal records you need to show lenders that you are a reputable company. Some things that will help you build business credit include acquiring your business license, tax identification number, address and contact information, checking account, etc. As you set up all of the basic things necessary to start a business you will easily be able to build business credit.
Have your company listed with Dun & Bradstreet and then you need to acquire at least 5 trade references. A trade reference is simply working with companies that report information to the credit bureaus. Things like your credit cards and leasing agreements are seen as trade references because these lenders need to report information to the credit bureaus. You do need to make sure you are working with trade companies that actually report information to the credit bureaus as only 1 in 3 actually report timely information.
To build business credit, pay your bills on time. Don't just pay them on time, pay them early. You should try and pay them at least a week or two before the due date. This will usually fetch you a discount on the bills but it will boost your Paydex score in a hurry.
Business credit is necessary for you to stay in business. Having strong business credit allows you to open up your business to the possibility of future loans so you can acquire inventory, equipment, supplies, and many other things. It may take awhile to build business credit but once you are on the right track and you have been able to strengthen your report, you will have an easy time acquiring any loan or financing you need for your business.
Corporate Credit Concepts specializes in build business credit. For more information about build business credit and how it might benefit your business, please CLICK HERE for a free phone consultation.