The path to great business credit for your company can be a complicated one without the right direction. There are a lot of facts and figures to consider, and vendors change their policies regularly. Below is a simple, four-step guide to how you go about gaining a business credit.
1. Make it legal
The first step on your business credit journey is to make sure that you have all of the legal requirements in place. Your company must be a separate entity in the eyes of the law, with a separate address, phone number, tax ID, Employer Identification Number and so on. Once you’ve set these up, you must open a separate banking account and savings account for the business, and make sure funds are deposited as soon as possible to begin building a credit history.
2. Set up small trade lines of credit
In the same way that you need to have a personal credit history in order to get a mortgage application approved, you need a record of your business credit.
This may seem a little confusing; if you’re trying to get business credit set up, how can you have a history? This is where small trade lines of credit come in; these are used to report payment histories to business credit bureaus, thereby building your trade profile. Click here for advice on how to set up small trade lines.
3. Talk to the experts
When you want to sit down with a vendor about your business credit, you need to make your requirements as a business clear. Going to local banks are a great idea because you get to have face-to-face relationships, and direct conversations with the people making the final decisions. Whether you’re just starting out in your business or not, this can be an intimidating prospect for people, so don’t be afraid to ask for advice. Why not take a business credit workshop? They’ll be able to send you tutorial videos, give you coaching, and provide you with all the guidance on which vendors are best to deal with.
4. Work on your score
Just like with your personal finances, your business also has a credit score, and there are several things you can do to improve it. For one thing, be sure to improve your personal credit score by paying bills on time and avoiding personal debts. If a bank can’t find enough information out from your business credit check because you haven’t been registered long enough, they will consult your personal records as a guideline.
Plus, you should always try to apply for credit before you need it. If you don’t need the money right now, but have projects in the pipeline that will require credit in future, try to apply for a smaller amount as soon as possible. Banks like to build up a credit history with businesses before they are happy to lend larger sums.
If you found this four-step guide useful, don’t be shy and leave us a comment with your thoughts.