A positive business credit is a core parameter in the realm of entrepreneurship which every business person should be striving to achieve. In doing this, it is advisable to separate the business credit from the personal credit so that the action(s) of any of them won’t be affecting the other. This way, you will be able to manage the business credit effectively and of course, ensure your personal life won’t interfere with your business in any way. With this in mind, it is important we learn how to build a business credit all the way from scratch to becoming astoundingly positive.
Incorporate your business
This is the first step to establishing a distinction between your credit and that of the business. In this, you will be placing the business as an independent entity and therefore all the transactions and other actions will be liable to the business itself. However, this is not possible in the case of sole proprietorships and partnerships since they cannot be legally separated from the owner. Therefore, you should consider registering your business as a limited company if at all you will have to obtain a legal distinction between you and the business.
Acquire the EIN number
This federal tax identification number is a requirement by the banks while opening a business account with them.Some larger corporations will also require this number for them to pay services rendered to them. This is in the spirit of compliance with the IRS rules and regulations. Therefore, ensure you get this number to avoid confrontation with the authorities and also to ensure smooth operations with other dealers.
Open a business bank account
After acquiring the EIN number, you should then open a bank account bearing the name of the business. Ensure you settle all the business financial transactions using that account. This will encompass payments of raw materials, payment of workers, and many other financialtransactions of the business. This will guarantee youraccount has a strong financial statement something which can increase your likelihood of securing a better loan.
Establish a line of credit with vendors
In this method, you should purpose to work with at least five or ten suppliers whowill create a credit for your company and request them to submit the credit history of your business to the reporting agencies. Since all the credits histories will be positive, chances are that your score will increase and become remarkably positive with time. Actually, this is a good opportunity which every entrepreneur should be striving to leverage on.
Get a business credit card
Acquire a business credit card from a financial institution which submits its credit reports to a reporting agency. You should ensure the card is serviced appropriately and always on time. Makesure also the card is not linked to you or any other person associated with the company as this might somehow affect the credit score in one way or the other
Settle all bills on time
As is the case with personal credits, late or failure to pay for the bills will attract a negative score something which will reduce your chances of securing a bank’s loan. Therefore, ensure all your business bills are paid on time in order to improve your credit scores.
When the above tips are practiced, your business credit scores will absolutely improve and open more opportunities to grow your business. In summary, having a good business credit will provide the following benefits:
- It will enable you to get better interest rates and credits conditions from lending institutions. this is because the law requires banks to give better loan deals for customers having better credit scores
- It will minimize the number of times you will be required to pay the vendors or suppliers in advance as your positive credit history will be enough evidence for them to trust you with their money.
- Positive credit score will also increase the chances of securing better payment terms from various suppliers and vendors. This might include a longer payment period as well as reduced payment rates.
After realizing good business credit, make sure to protect it by all means possible as it is likely to help you on a rainy day.