If you're just starting a business, "how to build business credit" might be one of the first concerns on your mind. When you're starting up a business, you've got a lot of initial expenses. You're going to have to find some way of funding that new business, and unless rich Auntie Mae wants to foot the entire bill, you're going to have to find a good loan. But finding a good loan requires good credit - and if you've just started your business, your business doesn't have any credit to its name at all! That can leave you wondering how to build business credit without a business in the first place.
Well, if you're trying to figure out how to build business credit without any business at all, you're not going to get very far. You can't really build business credit unless you're conducting some form of business transaction, whether you're completely established and comfortable as a business or not. The main problem you run into is that you can't really get your business up and running completely until you have that loan and you can't get that loan until you can prove your business is worth it. But if you're trying to find a good loan to get your business started, here's how to build business credit before you really get out on the market:
First, you're going to need your business to be established as a separate legal entity from yourself. That will allow your business to function as a business, instead of as a person in business. This means that you're able to build credit for your business specifically, instead of simply adding to your own personal credit history. The simplest way to separate your business from yourself legally is to establish it as a corporation. By doing this, you'll allow less direct control from yourself, but you'll also open it to funding from stockholders. You'll also set it apart with its own legal personality, distinct from your own.
As you establish your business as its own legal entity, there are a few things to consider. First, your business will need an EIN, or Employer Identification Number. This functions like a Social Security Number for your business, giving it a national identity that you can provide to banks and credit card companies. You'll need to set up a separate bank account from your own personal one, so you'll be able to pay your bills as a company (instead of simply paying the bills for your company,) and you'll want that EIN in order to set up an account with a business credit card company. Many credit card companies will be willing to establish a business account with you.
Once your business is its own, you can start building business credit. If you've got to build business credit, you're going to have to be working with creditors, usually through your suppliers. You can use a corporate credit line with our suppliers here, or you can use business credit cards. (Ideally, you can use both!) The main idea here is that you're proving to the bank that you can be trusted to make your payments, so you just want someone who will be willing to report your financial history. By opening a line of corporate credit, you'll allow yourself a constant stream of credit transactions with your suppliers, and by using your business credit card to make your company purchases, you'll be able to establish a separate line of credit with your credit card company. As long as you pay off your bills on time, you'll be able to use that credit report to your advantage.
Corporate Credit Concepts specializes in "KEY PHRASE". For more information about "KEY PHRASE" and how it might benefit your business, please CLICK HERE for a free phone consultation.