Business minded people always dream of owning a reputable business. But it takes a lot of planning, effort and dedication to achieve such reputation and stability in the business industry. Many would find a hard time starting up a business since every business needs a startup capital. It involves the possibility of losing personal money, which is the common reason why most people are afraid to start a business. But if you are wise enough, you can raise a startup capital through business credit. That way, you can separate your personal asset from your business.
It is better to keep your personal credit from your business credit. Building a business credit is important for any business since it helps optimize business operations and financial activities. It may take time and you may need to exert a lot of effort to build a credit line but it pays off in the end. Having this established before your business will experience financial problems is necessary. In that manner, you will not have a hard time borrowing money from banks or lending industry when you needed it the most. Therefore, this is an important process to have a good business.
There are general steps to follow in building a good business credit.
First, you have to start as you create your business. This is the first step and an important action to successfully establish your business. This involves papers and documents for legitimacy. It includes business plan and financial information, licenses, business phone line and having a Limited Liability Company (LLC) as well as Federal Employer Identification Number (FEIN). It is necessary to separate your business credit score from your personal credit score and make your business a separate entity.
Second, you have to research credit bureaus and lenders’ requirements. You should know what credit bureaus you get your company will get into. It is necessary to know the needed requirements in order to establish a credit profile with the credit bureaus.
Third, join credit bureaus. If your business meets all the requirements of the credit bureaus, it is best to join these bureaus.
Fourth, is to establish credit. There are few options to start a credit profile. You can obtain a bank account for your business. Community banks and credit unions are the best options because they are more flexible. Another option is to find investors and make purchases. Make sure to purchase from vendors that gives you a credit line. This is more likely if you have reputable investors. Getting a loan is also a way of establishing credit. Make sure that you pay on time.
After getting ready with all the requirements, you can now apply for business credit. At this point, especially if you have just started your business, it is difficult to obtain a credit. It is best to apply to creditors who are willing to help small business like yours without personal guarantee.
Once you already have a business credit profile, you can now work on improving an established credit profile. To improve your credit rating, you can get additional credit card. It is recommended to have only three credit cards instead of having many. You can also continue to work with suppliers. This can improve your profile as they send information to credit bureaus. On time or even early payment can also help since it is reflected on your profile. And also, keep your financial records and licenses updated.
As maintaining a business credit becomes overwhelming, it is imperative to also maintain your personal credit. You should always keep an eye with your profile. Check a couple of times a year and make sure current information are displayed and resolve any issue with the bureaus as one arises.
Lastly, you have to know your industry. Keep watch of your competitors and know what is going on. Joining circles of credit bureaus is a great help to get you updated.
In every business, it is important to abide by the law, know the trends and fulfill your obligations religiously. In that way, your business will grow as you build a good business name and reputation.
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