When you first start your business you may want to stay as far away from debt, loans and credit as possible. Many new business owners are trying to fund their ventures on their own, devoid of any credit what so ever. However, this is not always the best idea, especially as your business grows. Many people are starting businesses for conscious reasons and are very committed to advancing their causes, due to the passion behind it. For these business owners, money usually does follow and quite quickly. You may now need to consider more space, more employees and more money, to help advance your cause. What if you are in business to be a millionaire, well you too will definitely want to build your business credit. Let's look at some ways you can do this.
First you should recognize that your personal credit and your business credit are and should be two different things. If you are a sole proprietor working under your own social security number, you'll want to change that as soon as reasonably possible. This is the first step to differentiating you from your business and letting your business establish credit on its' own. You can do this by forming an LLC or a Corporation of one type or another. A bit of research on the governments website irs.gov can also be very helpful in doing this. Make sure to read up on processes you can handle yourself and never pay someone else to complete these services for you.
Now you'll want to make sure that you streamline your debtors to the bare minimum. What does that mean? Well your business may be able to function quite successfully without the latest and greatest in new software and technology. Make sure that anything you buy on credit or lease is an absolute necessity. This is important because the fewer bills you have, the more bills you can pay on time. This is key to build your business credit toward the positive end of the spectrum. It might seem like a no brainer, but often times new business owners are so enthused about their new endeavors and success that they want to purchase everything someone recommends, which can put you in debt to many vendors. This can make it hard to pay all your bills on time when times are slow and as any business owner will tell you, there will be slow times.
You'll want to make sure that you register your business with the credit reporting agencies that play a key roll in lending. Many business owners don't know that they need to take this step. Especially if you have a business office and pay utilities and other bills you'll want to make sure that the major agencies such as: Equifax, Experian, D&B and TransUnion, are aware of how promptly you pay your bills. Don't take this for granted. You may be hesitant, thinking that registering your business will put in the line of fire when things may not be going well. Don't be fooled, whether you know it or not, these agencies may already have a file on your business.
Make purchases that show your fiscally responsible and have a great head for business. Buying vacations with your business card is not a good idea. Follow these few rules and you'll have a great business credit score in no time.
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