It’s one of the most important resources for small businesses today; it helps them manage seasonal cash flow, purchase inventory, obtain equipment and technology, and build and plan for the future. It’s business credit. But as many business owners have found, obtaining business financing, especially for a newly established business, isn’t always easy.
If you’re starting a new business or looking to take an existing one to the next level, it’s important to take some steps now to build and establish good business credit for the future. Here are seven things you can do:
- Establish your business entity. Your business should be a separate entity with its own name. You should also have a separate phone number for your business, which should be listed in phone directories.
- Incorporate your business. You can establish a Limited Liability Corporation or LLC, which will help you keep your personal and business credit separate.
- Apply for a federal Employer Identification Number (EIN). This is the equivalent of a Social Security Number, only it’s used for business.
- Open a business bank account. Once you establish your business and obtain your EIN, open a business bank account in the name of your business. Use that account to pay bills for your business.
- Apply for a business credit card. You can start building your credit by applying for a credit card in the name of your business.
- Establish lines of credit with your suppliers. Another way to establish your creditworthiness is to ask your suppliers to extend credit to you. Then, ask them to report your history of making payments to reporting agencies.
- Pay your bills on time. Every time. Late or delinquent payments will negatively impact your business credit score and could be the difference between getting approved or denied for credit.
By establishing and maintaining good business credit, you will get more affordable financing to help you manage cash flow more easily and grow your company for the future. And that’s good for business.