Building business credit is an important element especially when you need to borrow money for starting new business or expanding your current one. Most businesses want to be able to borrow money when they need it, without the owners having to guarantee the loans personally so as to minimize their risk.
There are essentially some important steps to follow while establishing business credit: Setting up a correct corporate structure and ensuring that your business appears stable and real to the credit bureaus. This means that you must get the proper occupational licenses and a listed phone number with directory assistance in the businesses' name, among other things.
Borrowing or buying products and services from companies that will report your credit history to the major business credit reporting agencies such as Dunn & Bradstreet and Experian. Unlike personal credit ratings, best business credit scores are reserved for large stable businesses with several million dollars in sales a year and 25-50 or more employees. However, you can start small and gradually build your business credit rating to get the requisite borrowing power that your enterprise will eventually need.
It is essential to separate your personal credit from your business credit. Thus, even if your business fails to pick up, your personal credit will remain untouched. Similarly, if your personal credit takes a downward spiral, your business rating might also get affected even though it may be doing well and have nothing to do with your personal finances.
To ensure this separation and build business credit, you need to first form an LLC whereby your business becomes an entity unto itself. Next, you must have a Federal EIN and open a separate bank account under the exact legal name of the business and obtain all necessary business licenses, permits, etc.
It is imperative to open a business credit file with all of the three major business credit reporting agencies, obtain five vendors and/or suppliers that will extend a small amount of credit to your business and report your payment histories to these agencies.
Get three business credit cards, the transactions of which will be reported to the business credit agencies. Most importantly it is important that you pay all your bills on time.
William Brister - http://www.businessloanproguide.com - A guide to business loans.
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