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There are numerous reasons why business owners
may want to build a business or corporate credit. But the most common is that,
building corporate credit enables business owners to get loans or any other
types of funding without the need to use the personal credit. The latter can be
quite risky, as lenders usually require individuals who use personal credit to
complete the payment of the debt whether or not the business has the needed
funds.
1.
Apply for credit soon after business launch.
Apply for a credit soon after the business launch. If you are running a small
business, it will take two years before you establish the business and convince
the bank to offer you a sizeable business line of credit and be able to get
small business loans.
2.
Incorporate your own business. To be able
to reap the perks of having a corporate credit, you should incorporate your own
business. By which, you will also separate your personal finances from the
business’s legally and distance you from any probable business liabilities in
the future.
3.
File for an EIN (Employee Identification
Number) - This number can be acquired from IRS. This lets the corporation to
act legally as its own taxable entity, which means that the corporation now
needs to file separate tax returns and can build a corporate credit.
4.
Create a dedicated business phone line.
Register the phone line number under the legal name of your business. Ensure
that the number will be utilized in business communication and will appear on
all the business documents that you make and. The dedicated business phone line
can be an internet phone, cell phone, or landline.
5.
Get Business Credit Card and Banking
Accounts. Through separating your personal and business banking accounts, you
start to establish a business relationship with the banking institutions you
work with. This can be helpful when you decide to apply for business funding.
6.
Ensure that your personal credit is at
par with your business credit. Although the corporate credit will be created
separately from a business owner’s personal credit, a bank’s decision of
whether to lend to the business or not will be affected by the business owner’s
creditworthiness.
7.
Utilize trade credit. When you purchase
supplies or materials from vendors, you typically have the option to purchase
on credit. This enables you to pay a number of weeks after receiving the
shipment. Contact the supplier or the vendor to
know whether this kind of service is available and if yes, get it set up
and ensure that the vendor reports your business payment history to credit
bureaus, which will determine your business credit scores.
8.
Use the credit as immediate as possible.
When you are able to acquire a credit of any kind, make sure to use it as soon
as possible. A credit history cannot be built if you are not using your credit.
Begin small and only charge amounts that the business can manage so paying back
will never be too difficult. Ensure to make payments early.
9.
Work with not just one lender. When you
are just starting out and are building business credit, you will likely be at
the mercy of the policy of the lender when they are deciding whether to lend to
your business or not. To ensure that you get funds when you need it the most,
try to work with more than one lender.
10.
Figure out whether or not the lenders
report to the credit bureaus. Lenders are not really required to report a
business payment history to the credit bureaus so to ensure that they consider
doing so, talk to them especially if you take out a credit line or loan to
build business credit.
Hope these steps help you in building your
corporate credit.
