Building Business Credit is very similar to building your personal credit. It involves applying for Business Credit, negotiating credit terms with suppliers, and making on-time payments. But just as building personal credit requires initiative and effort, building Business Credit will also benefit your personal credit rating. So how do you start building Business Credit?
First of all, you have to understand that building credit is an important part of running your business. Many people think that building Business Credit will be more difficult than boosting personal credit. However, the reality is that building Business Credit is much more important than you may realize. According to a recent study, nearly 20 percent of small business loan applications are declined due to poor credit. This means higher interest rates and insurance policies, as well as less favorable terms with lenders.
To build Business Credit, you must separate personal and business finances. Create a separate business bank account and keep business books separate from your own. Get a Business Credit card from your bank, or apply for one under the business name. A business phone line and dedicated office space are other ways to build Business Credit. But these methods can take time. It is not a quick fix, and you should take your time. If you do this, you’ll be well on your way to a great future.
Before you even start building Business Credit, you must create good relationships with vendors and other businesses. At the very least, you should have at least five suppliers. Your first supplier may be your phone company, so get familiar with your other vendors. The next step is to establish Business Credit Monitor with utilities and services. Making payments on time is crucial to building Business Credit. You should also monitor your monthly business budget closely. By maintaining good Business Credit, you’ll be able to get financing for any business.
Another great way to build credit for your business is to make regular purchases. These purchases can be made with Business Credit cards, or through a line of credit. The key is to maintain good relationships with your suppliers, so that your payments are reported to the Business Credit agencies. You may also want to request a NET 30 payment term from suppliers, which allows you to make payments on time. By choosing vendors that report to Business Credit bureaus, you’ll be building a good Business Credit history.
Establishing a good credit history for your company starts with locating accounts that will report and approve your payments. To get started on establishing Business Credit, you will need a minimum of five reporting accounts. Take care to select the accounts that will provide you with a record of the monthly payments you make. Creating a good reputation for your company takes time and effort. The earlier you get started, the better off you will be. If you don’t take the time to establish credit for your company, you might have to rely on your personal credit instead. Given that personal credit is such a valuable resource, you shouldn’t let this opportunity slip through your fingers.